Art not for art’s sake: an exploration of the Chinese art market

Abstract

We investigate the price impact and returns for 165,847 lots sold from 533 artists executed on Chinese painting and calligraphy over the period of 2000-2017. We document an annual return of 10.67% for our sample artworks, with certain attributes carrying greater price impacts, including authenticity, mounting, time of creation, the month of sales, and the auction houses. Our results also reveal two art market booms, with the first peak in 2005, subsequently reaching the record peak in 2011. In addition, compared with other investment assets, Chinese painting and calligraphy yield a relatively higher return compared to other investment assets. The artwork has a relatively lower correlation with other assets, suggesting potential diversification benefits. The average holding period of Chinese painting and calligraphy is about three years, in stark contrast to an average 10-year turnover of art in Western countries. This provides strong evidence that excessive speculative activities exist in the Chinese art market. Thus, art market participants in China need to be aware of the risk associated with art investments, as art is not necessarily for art’s sake.