Art investment in South Africa: portfolio diversification and art market efficiency

Botha, Ferdi; Snowball, Jeanette D; Scott, Brett

Title: Art investment in South Africa: portfolio diversification and art market efficiency
Creator: Botha, Ferdi
Creator: Snowball, Jeanette D
Creator: Scott, Brett
Date Issued: 2016
Date: 2016
Type: text
Type: article
Identifier: http://hdl.handle.net/10962/64794
Identifier: vital:28601
Identifier: http://www.dx.doi.org/10.17159/2222-3436/2016/v19n3a4
Description: Art has been suggested as a good way to diversify investment portfolios during times of financial uncertainty. The argument is that art exhibits different risk and return characteristics to conventional investments in other asset classes. The new Citadel art price index offered the opportunity to test this theory in the South African context. Moreover, this paper tests whether art prices are efficient. The Citadel index uses the hedonic regression method with observations drawn from the top 100, 50 and 20 artists by sales volume, giving approximately 29 503 total auction observations. The Index consists of quarterly data from the period 2000Q1 to 2013Q3. A vector autoregression of the art price index, Johannesburg stock exchange all-share index, house price index, and South African government bond index were used. Results show that, when there are increased returns on the stock market in a preceding period and wealth increases, there is a change in the Citadel art price index in the same direction. No significant difference was found between the house price index and the art price index, or between the art and government bond price indices. The art market is also found to be inefficient, thereby exacerbating the risk of investing in art. Overall, the South African art market does not offer the opportunity to diversify portfolios dominated by either property, bonds, or shares.
Format: 11 pages
Format: pdf
Language: English
Relation: South African Journal of Economic and Management Sciences
Relation: Botha, F., Snowball, J. and Scott, B., 2016. Art investment in South Africa: Portfolio diversification and art market efficiency. South African Journal of Economic and Management Sciences, 19(3), pp.358-368
Relation: South African Journal of Economic and Management Sciences volume 19 number 3 358 368 2016 2222-3436
Rights: Botha, Ferdi
Rights: Snowball, Jeanette D (Prof)
Rights: Scott, Brett
Rights: Use of this resource is governed by the terms and conditions of the AOSIS requirement for authors to publish in Open Access under the Creative Commons Attribution 4.0 International (CC BY 4.0) License

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SDG 08. Decent Work and Economic Growth

Botha, Ferdi (Mr)

RU Department of Economics and Economic History

Snowball, Jeanette D (Prof)

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