The winner's curse on art markets

Arbeitspapier

We investigate the effect of overreaction in the fine art market. Using a unique sample of auction prices of modern prints, we define an overvalued (undervalued) print as a print that was bought for a price above (below) its high (low) auction pricing estimate. Based on the overreaction hypothesis, we predict that overvalued (undervalued) prints generate a negative (positive) excess return at a subsequent sale. Our empirical findings confirm our expectations. We report that prints that were bought for a price 10 percent above (below) its high (low) pricing estimate generate a positive (negative) excess return of 12 percent (17 percent) after controlling for the general price movement on the prints market. The price correction for overvalued (undervalued) prints is more pronounced during recessions (expansions).

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper Series ; No. 564

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Portfolio Choice; Investment Decisions ; Information and Market Efficiency; Event Studies; Insider Trading
• Subject: overreaction ; winner's curse ; pricing estimates ; repeat sale ; auction ; art market

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kräussl, Roman ; Mirgorodskaya, Elizaveta
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/149620
• Last update: 10.03.2025, 11:41 AM CET