Art As An Asset

The project focused on the art market and how art can be quantitatively and qualitatively judged as an asset. The recently witnessed rapid growth of the art market has prompted discussions about the merits of art as an asset. We analyzed some key characteristics of the art market that are detrimental to its performance as an asset. These characteristics include; 

• how art acts as a store of value,  

• how affected the art market is by price volatility,  

• how liquid the art market is,  

• and the running costs of owning art.  

To conduct our research activities, we traveled to Los Angeles, known as the hub of the art market. There, we attended multiple art auctions as observers and gained first-hand knowledge from buyers, sellers, and auctioneers about the workings of the art market. These auctions included Bonham's California Art Auction, which featured prominent artworks, mainly in the form of paintings, created by local artists representing Californian traditions and scenery.

In these auctions, we observed and learned about a few common and interesting trends. Firstly, though we did come across some art enthusiasts who bought art not for investing reasons but because they were enthusiastic art collectors, most attendees of these auctions (including virtual attendees) were corporate representatives bidding on behalf of notable hotel chains, hedge funds, and wealth management firms.

Secondly, in accordance with the Winner's Curse, we witnessed many pyrrhic victories where bidders ended up winning a lot at a bid significantly higher than the valuation threshold for that artwork. In conversations with auction attendees, we gathered further noteworthy insight into the art market. Some themes that were cited by multiple respondents included the exclusivity of the consumer base, the high frequency of bidding wars, and skepticism regarding the nascent digital art market.

Attending these auctions was instrumental in expanding our understanding of the economic aspects of the art market. Yet, art, by its very nature, has inherent cultural aspects that are not necessarily accounted for in these auctions. To this extent, we then visited various art galleries in Los Angeles, including the renowned Museum of Contemporary Art and The Broad.

At these exhibitions, we got to witness the cultural power associated with art. For instance, every piece of artwork in the Henry Taylor exhibition at the Museum of Contemporary Art told a unique story about being black in Los Angeles. This led us to an engrossing dilemma; how can you place a price tag on something that has a different meaning for every individual?

Visiting a more abstract art exhibition at The Broad told a similar story. In conversing with a handful of gallery attendees, we were able to capture a trend that suggested that true art enthusiasts believed that art should be valued not according to its intrinsic value, but rather the value of the message it dispenses.

Overall, our project told us a great deal about the potential that lies in the art market as well as its current state. We hope that these findings are utilized and further expanded upon by individuals interested in both the economic and cultural aspects of the art market.