The Rate Of Return From Investing

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What methods have been used by researchers to examine the rate of return from investing in the visual art market? Sub- Questions What are the limitations of the Repeat-Sales Model (RSM) and the Hedonic Pricing Model (HPM)? What could be done further for future research? Abstract One of the most important aspects of the art market is the uniqueness of the art works. Lately it has been recognized that the most popular methods of creating art price indexes and examining the art market, rely on biased data. The methods that have been used so far by researchers in examining the rate of return for art include the Hedonic Price method (HPM) and Repeat-sales method (RSM). According to Agnello and Pierce, in the art literature, researchers do not use commonly HPM because of data unavailability (Agnello & Pierce, 1996). A common problem in using HPM is the time instability of the art price indexes and biased sample selection (Collins et. al). In HPM, “all commodities may be included and resales are considered as sales” (Gerard-Varet, 1995, p. 514). In general though, it is very hard to find detailed information on artworks’ attributes. Hence, researchers are turning to RSM using Retlinger’s data, which are rich in historical data (Agnello & Pierce, 1996). RSM consists of work of arts that have been sold at least twice within a particular period of time. Following, the researchers conduct a regression of the change in the price of each piece on a “set of dummy variables”, estimating
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