Can art hedge against economic policy uncertainty?: New insights through the NARDL model

Abstract

This paper uses the nonlinear autoregressive distributed lag (NARDL) model to investigate whether art can hedge economic policy uncertainty. We analyze the impact of the global economic policy uncertainty (GEPU) on the global overall art price and the art price indices divided by category and creative period. We find that only Old Masters can hedge against shocks from global economic policy uncertainty in the long-run. The results of this paper have relevant implications to investors and collectors in the art market. Investors and collectors can make more sensible trading and investment strategies based on the level of the economic policy uncertainty in a period of time. When the global economic policy uncertainty rises, investors can pay more attention to Old Masters.