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American Economic Review: Vol. 99 No. 4 (September 2009)

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Art as an Investment and Conspicuous Consumption Good

Article Citation

Mandel, Benjamin R. 2009. "Art as an Investment and Conspicuous Consumption Good." American Economic Review, 99(4): 1653-63.

DOI: 10.1257/aer.99.4.1653

Abstract

This paper provides a simple and empirically plausible model of artworks as investment vehicles. It reconciles the observation that average financial returns for collectibles are low and volatile with the theory of consumption-based asset pricing. Art assets are appealing both for their ability to transfer consumption over time and for their use as signals of wealth, as in the literature on the demand for luxuries. Adding art value to utility, returns also reflect this "conspicuous consumption" dividend; as a result, average financial returns are low. Risk premia for artworks are predicted to be modest or even negative. (JEL G11, Z11)

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Authors

Mandel, Benjamin R. (U CA, Davis)

JEL Classifications

G11: Portfolio Choice; Investment Decisions
Z11: Cultural Economics: Economics of the Arts and Literature


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