Abstract
This paper introduces a new financial metric for the art market. The metric, which we call Artistic Power Value (APV), is based on the price per unit of area (dollars per square centimeter) and is applicable to two-dimensional art objects such as paintings. This metric has several advantages from the investor’s viewpoint. It makes it easy to: (i) estimate price ranges for different artists; (ii) perform comparisons among them; (iii) follow the evolution of the artists’ creativity cycle overtime; and (iv) compare − for a single artist − paintings with different subjects or different geometric properties. This metric also facilitates the process of estimating returns and leads to a price index that satisfies the monotonicity condition. Finally, due to its transparency, the APV metric is very well suited to design derivatives-like instruments that can appeal to both, investors and speculators. Several examples using auction data demonstrate the usefulness of the APV metric.
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