It was our old friend Pythagoras of Samos who declared "all is number," in which was included the seemingly non-quantitve realm of art. Pythagoras meant that artistic beauty and the mathematical forms of nature are correlated. What he didn't mean was that artistic value could be assessed by statistical models, which neither existed at the time, nor would not have likely harmonized with Pythagoras' harmony of the spheres aesthetic vision. And that's probably why Mr. Side Angle Side didn't wind up with a mansion in Greenwhich. Because what we modern whizzes figured out is that art can be valued like any other asset, which is what the hedge fund managers started doing in the 1980s. Such is the fascinating topic of my friend Andrea Hill's article in an art publication called The Highlights (not to be confused, as she notes, with Highlights, the children's magazine that adorns pedetrician waiting rooms nationwide).
The article looks at several web sites that attempt to quantify art vales by using "typically insider information—who is the most important artist in the world or whether contemporary or Dutch 18th-century painting is the wiser investment—and crunch[ing] the data through internal databases to translate their results into public information." The main sites are Artfacts, Art Market Research, Art Confidence Indicator, and the Mei Moses Index, the last of which is the trailblazer:
In the 1990s two Stern School of Business professors developed the Mei Moses Index, which uses auction prices to calculate annual returns. For the most part, it follows the S&P index fairly closely and has marginally outperformed it in the past 10 years and significantly surpassed it in the past 5 years, putting up 16.2% returns above the S&P’s 12.7% average. (Andrew Slayman, “State of the Art Market: Through Thick and Thin,” Art & Antiques, August 2008) Art investment funds have adopted the Mei Moses Index as supportive evidence to invest in art as an asset class.
Are you wondering, then, whether the art world's formulas predicted the empty galleries of the past two months? They're not exactly those kinds of models, but they do make numerical claims, and Andrea decided to put those claims to the numerical test. She gets into the R-squared and alpha and beta of it all via regression and the kind of detailed analsyis of someone who has recently been steeped in econometrics and still remembers it all. Among the results: when hip contemporary artists fall in rankings/value, the Old Masters rise, like safe hedges against risky stocks. But that's just one observation, with little power as an overarching statement. Damned economic models! Andrea points out several problems that plague such modeling: small n's (meaning, not enough data), and the fact that what data can be collected has a hard time distinguishing "between important institutions and galleries and lesser-known ones." Add to that the standard statistical disclaimer that correlation is not causality and you're left with the conclusion:
...an artist’s rank has something to do with exhibition history (or at least 47 percent of the rank has something to do with it—within a 5 percent error margin of course)
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