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Title: Testing for bubbles in the art markets: an empirical investigation
Authors: Assaf, Ata 
Affiliations: Department of Business Administration 
Keywords: Speculative Bubbles
Right Tailed ADF
Subjects: Art--Marketing
Issue Date: 2018
Part of: Journal of economic modelling
Volume: 68
Start page: 340
End page: 355
The market for artworks emerged about ten years ago and seems to have coincided with a rapid increase in the number of participants and record-breaking prices. This raises the question of whether this market is experiencing a rational bubble or not. In this paper, we apply a battery of tests to detect explosive behavior in the art markets from 1998 to 2015. According to the Markov Switching ADF test, two regimes exist for all the indices, but no bubble is found. However, applying the right- tailed ADF, we detect more than one bubble with most of the bubbles happening in the period 2002–2005. Then, accounting for the volatility shifts, we apply the bootstrap tests and find similar results. We argue that the market has been going through some adjustment after the 2008 financial crisis and becoming more sensitive to economic and geopolitical events, with the artworks demonstrating a level of maturity similar to other alternative investment classes. Our findings have important implications in recognizing the cause of bubbles and to take steps in reducing their impact on the economy.
DOI: 10.1016/j.econmod.2017.08.004
Ezproxy URL: Link to full text
Type: Journal Article
Appears in Collections:Department of Business Administration

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