Nonlinearity and nonstationarity in international art market prices: evidence from Markov-switching ADF unit root tests
Emrah Çevik (),
Erdal Atukeren and
Empirical Economics, 2013, vol. 45, issue 2, 675-695
This study investigates the presence (or lack thereof) of nonlinear dynamics and nonstationarity in international art market prices using quarterly data for the period 1990–2011. We first test whether art market price indices follow stochastic trends or whether they are stationary by means of linear unit root tests. Next, we estimate the Markov regime-switching ADF model and test whether the linear or the nonlinear regime-switching model provides a better characterization of the global art market price series. We find that all art market price indices (except for Drawings) exhibit nonlinearity. To our knowledge, our study is the first one in the literature to suggest that a nonlinear (Markov regime-switching) model provides a better characterization of the behavior of price dynamics in international art markets. In particular, our findings indicate that the market for the overall global art market, paintings, old masters, sculptures, photographs, prints, and contemporary art might indeed be stationary while exhibiting nonlinear regime-switching properties. On the other hand, the market for drawings and the Nineteenth century art are found to be nonstationary. Overall, despite the common ground of a regime-switching framework, we still find that the sub-segments of the art market have their own inner regime switching dynamics and hence they can evolve differently overtime. Copyright Springer-Verlag 2013
Keywords: Art market; Unit roots; Markov regime-switching model; Nonstationarity; Z11; C20; G11 (search for similar items in EconPapers)
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