When a Master Dies: Speculation and Asset Float

Julien Penasse, Luc Renneboog and Jose Scheinkman

No 26831, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The death of an artist constitutes a negative supply shock to his future production; in finance terms, this supply shock reduces the artist's float. Intuition may thus suggest that this supply shock reduces the future auction volume of the artist. However, if collectors have fluctuating heterogeneous beliefs, since they cannot sell short, prices overweigh optimists' beliefs and have a speculative component. If collectors have limited capacity to bear risk, an increase in float may decrease subsequent turnover and prices (Hong et al. 2006). Symmetrically, a negative supply shock leads to an augmentation of prices and turnover. We find strong support for this prediction in the data on art auctions that we examine.

JEL-codes: G12 G4 Z11 (search for similar items in EconPapers)
Date: 2020-03
Note: AP
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Citations: View citations in EconPapers (4)

Published as Julien Pénasse & Luc Renneboog & José A Scheinkman & Stijn Van Nieuwerburgh, 2021. "When a Master Dies: Speculation and Asset Float," The Review of Financial Studies, vol 34(8), pages 3840-3879.

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Journal Article: When a Master Dies: Speculation and Asset Float (2021)
Working Paper: When a Master Dies: Speculation and Asset Float (2020)
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