Art investment as a portfolio diversification strategy in South Africa

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

Title: Art investment as a portfolio diversification strategy in South Africa
Creator: Botha, Ferdi
Creator: Scott, Brett
Creator: Snowball, Jeanette D
Date Issued: 2015
Date: 2015
Type: text
Type: article
Identifier: http://hdl.handle.net/10962/67422
Identifier: vital:29086
Description: publisher version
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. 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 VAR of the art price index, Johannesburg Stock Exchange all-share index, house price index, and South African government bond index were used. Flowing from the VAR results, additional analyses included variance decomposition, impulse response, and, to determine volatility, variance and standard deviation measures for each index. Results show that, when there are increased returns on the stock market in the previous period and wealth increases, there is a change in the Citadel Art Price Index in the same direction. This finding is consistent with Goetzmann et al. (2009), who reported that there is a strong relationship between art and equity markets and that art price changes are driven by capital gains and losses. No significant difference was found between the house price index and the art price index, and neither between the art and government bond price indices. Overall, the South African art market does not offer the opportunity to diversify portfolios dominated by either property, bonds, or shares.
Format: 14 pages
Format: pdf
Publisher: Environmental Education Association of Southern Africa
Language: English
Relation: Economic Research Southern Africa (ERSA) Working Paper
Relation: Botha, F., Scott, B. and Snowball, J. (2015). Art investment as a portfolio diversification strategy in South Africa. ERSA Working paper 537, August 2015.
Relation: Economic Research Southern Africa (ERSA) Working Paper volume 537 number 1 14 August 2015 2411-5959
Rights: Copyright held by the authors
Rights: Use of this resource is governed by the terms and conditions of the Creative Commons Attribution 4.0 International (CC BY 4.0) License (https://creativecommons.org/licenses/by/4.0/)

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Snowball, Jeanette D (Prof)

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