Constructing Art Price Indices on Works by Russian Artists

In this paper, we build hedonistic price indices on artworks of XX century Russian artists. Analysis is based on unique hand-collected dataset containing 7655 art auction results from 1985 to 2016. We apply hedonistic model estimated with three methods – standard OLS estimator, Heckman sample selection model and quantile regression. We find that there are significant differences in price formation between artworks belonging to different art-market price segments. Empirical evidence also suggests that highly priced Russian paintings have both higher expected returns and risk than those that are priced lower. When comparing returns on art and stock returns we conclude that albeit booming periods, in long term returns generated by art and equities are comparable – with much higher volatility for the former. We also investigate possible impact of stock indices on art indices. Using VAR models, we find that most of the calculated art indices are impacted by both Russian and US stock market movements.