Abstract
This chapter discusses that art prices, like prices in financial markets, are determined by the interaction of supply and demand. A range of dichotomies drives values in the art market; they include objective and subjective appraisals, rational and irrational forces, and quantitative and qualitative factors. In the art-appraisal practice, appraisers have seen many instances where collectors were unaware that certain items they owned were extraordinarily valuable. The work had been passed down through the generations within the family, and since an expert had never properly identified the work, the owner had never known that she owned such a valuable asset. In case the artwork is not sold and an appraisal-based valuation is made, the valuation is determined on the estimated price that would be reached at auction. Many art price indices that are used to measure returns are based on auction prices achieved in the market. The qualitative inputs in the valuation process should not be simply the random, subjective feelings of a particular collector or investor; however, should rather be informed input from the research of well-qualified experts in the sector.
Published Version
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