Where the Blue Chips Fall
economist michael moses tracks the high-end art market
by jori finkel
By now everybody knows the story of Picasso ’s Garçon à la pipe, from 1905.Bought by John Hay Whitney in 1950 for a reported $30,000,the Rose Period masterpiece sold for $104 million at Sotheby ’s in May, becoming the world ’s most expensive painting. Sotheby ’s described it as a “haunting and poetic ” portrait of adolescent beauty..Reporters called it “the best investment ” ever made in art..
Think again. Despite its staggering price, the Whitney picture did not generate an earth-shattering financial return, says Michael Moses, an economist at New York University ’s Stern School of Business. He calculates that the painting had a compound annual return of 16.3 percent. Yes, that ’s impressive, surpassing the S&P 500 ’s average return for the same period of 12.1 percent. But it ’s hardly the best investment ever made in art, and not even the best return for your money on a Picasso. According to Moses ’s research on auction results, that honor goes to a small drawing the artist made in 1903,Le vieillard. Purchased at Christie ’s in 1991 for $9,350, it sold two years later at Sotheby ’s for $25,300,making its annual return 64 percent.
Since this line of thought might surprise members of the art world, who are so often dazzled by high price tags, Art & Auction asked Moses to share his data. We asked him to rank the three heavyweights from the May sales —Picasso, Monet and Renoir —in terms of auction performance. Which of these artists has historically posted the best, and worst, returns? Do their works, which so often get labeled “blue-chip,” really resemble the tried-and-true stocks of ge,ibm or Microsoft?
Yes and no, says Moses, who used as his sample 372 works by the three artists that have sold more than once at auction. “Monet, Renoir and Picasso are very much the large-cap stocks of the art world, in that they are the most frequently traded of the truly expensive artists. We couldn ’t have done this study,for example, with Degas or van Gogh,” he says..“But when it comes to financial returns, our three great artists fall somewhat flat. We found that they underperform the art market as a whole.”
While Picasso leads the pack with an annual return of 8.9 percent (see bar graphs on page 51 ),the others lag behind the Mei Moses Art Index, which Moses and his nyu colleague Jian ping Mei developed using repeat auction sales for thousands of different artists. And all three trailed the S&P 500. This reflects a trend that Mei and Moses described in “Art as an Investment and the Underperformance of Masterpieces,” published in the American Economic Review. “The art market, like the stock market,is very democratic,” says Moses.“ If you slice the art market into thirds by purchase price, the works in the top third do not appreciate as much as those from the middle third, and works from the middle third do not appreciate as much as those from the bottom third.” Apparently the most expensive works have already made their way into the canon of art history and have that recognition written into their price tag. Pricey works have less room to grow.
Still, blue-chip art has one wonderfully redeeming feature, which may be best described as staying power. As shown in the bar graph on holding periods, all three artists promise strong returns, as long as you keep the works for several years. Just look at Monet, who posts the lowest average return (2.3 percent) for works sold within 5 years of purchase, but the highest (12 percent)for works sold after 15 years —a dramatic illustration of how art can appreciate over a long holding period. And that speaks to another finding Moses has made: While fine art sold at auction exhibits greater day-to-day volatility than stocks, it roughly matches the performance of the S&P 500 over the long haul.
Some data is ambiguous. Some numbers equivocate. But this much is clear: If you plan to park your money in art, you should make sure time is on your side. Take your cue from John Hay Whitney and hang on to that Picasso as long as you can.
economist michael moses tracks the high-end art market
by jori finkel
By now everybody knows the story of Picasso ’s Garçon à la pipe, from 1905.Bought by John Hay Whitney in 1950 for a reported $30,000,the Rose Period masterpiece sold for $104 million at Sotheby ’s in May, becoming the world ’s most expensive painting. Sotheby ’s described it as a “haunting and poetic ” portrait of adolescent beauty..Reporters called it “the best investment ” ever made in art..
Think again. Despite its staggering price, the Whitney picture did not generate an earth-shattering financial return, says Michael Moses, an economist at New York University ’s Stern School of Business. He calculates that the painting had a compound annual return of 16.3 percent. Yes, that ’s impressive, surpassing the S&P 500 ’s average return for the same period of 12.1 percent. But it ’s hardly the best investment ever made in art, and not even the best return for your money on a Picasso. According to Moses ’s research on auction results, that honor goes to a small drawing the artist made in 1903,Le vieillard. Purchased at Christie ’s in 1991 for $9,350, it sold two years later at Sotheby ’s for $25,300,making its annual return 64 percent.
Since this line of thought might surprise members of the art world, who are so often dazzled by high price tags, Art & Auction asked Moses to share his data. We asked him to rank the three heavyweights from the May sales —Picasso, Monet and Renoir —in terms of auction performance. Which of these artists has historically posted the best, and worst, returns? Do their works, which so often get labeled “blue-chip,” really resemble the tried-and-true stocks of ge,ibm or Microsoft?
Yes and no, says Moses, who used as his sample 372 works by the three artists that have sold more than once at auction. “Monet, Renoir and Picasso are very much the large-cap stocks of the art world, in that they are the most frequently traded of the truly expensive artists. We couldn ’t have done this study,for example, with Degas or van Gogh,” he says..“But when it comes to financial returns, our three great artists fall somewhat flat. We found that they underperform the art market as a whole.”
While Picasso leads the pack with an annual return of 8.9 percent (see bar graphs on page 51 ),the others lag behind the Mei Moses Art Index, which Moses and his nyu colleague Jian ping Mei developed using repeat auction sales for thousands of different artists. And all three trailed the S&P 500. This reflects a trend that Mei and Moses described in “Art as an Investment and the Underperformance of Masterpieces,” published in the American Economic Review. “The art market, like the stock market,is very democratic,” says Moses.“ If you slice the art market into thirds by purchase price, the works in the top third do not appreciate as much as those from the middle third, and works from the middle third do not appreciate as much as those from the bottom third.” Apparently the most expensive works have already made their way into the canon of art history and have that recognition written into their price tag. Pricey works have less room to grow.
Still, blue-chip art has one wonderfully redeeming feature, which may be best described as staying power. As shown in the bar graph on holding periods, all three artists promise strong returns, as long as you keep the works for several years. Just look at Monet, who posts the lowest average return (2.3 percent) for works sold within 5 years of purchase, but the highest (12 percent)for works sold after 15 years —a dramatic illustration of how art can appreciate over a long holding period. And that speaks to another finding Moses has made: While fine art sold at auction exhibits greater day-to-day volatility than stocks, it roughly matches the performance of the S&P 500 over the long haul.
Some data is ambiguous. Some numbers equivocate. But this much is clear: If you plan to park your money in art, you should make sure time is on your side. Take your cue from John Hay Whitney and hang on to that Picasso as long as you can.
JORI FINKEL IS THE SENIOR EDITOR OF ART +AUCTION
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