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Survivorship bias . Works Bought In at auction are not recorded.
Appraisal induced bias . Works of art at auction are estimated above zero and not allowed to sell at below an undisclosed reserve. Works of art are infrequently valued and subject to average price quotes
The data bases do not calculate the changes in value over time of the individual objects
Transaction costs are not impounded into final price.
While the S&P 500 and UK FTSE 100 have strong correlations to each other, Art 100 has consistently low and even negative correlations to domestic and international equity.
An asset with negative correlation is a hedge asset. Such assets, like art, are particularly effective in reducing a portfolio's total risk.
In fact, in every period below, art's consistently low correlations to all other asset classes enable art to have a key differentiating characteristic: the lower the correlations and covariances, the lower the total portfolio risk.
The correlation remains low when UK and US art markets, taken independently, are measured against US and UK equity markets
The correlation is not significantly affected during bear and bull markets.
Correlation Indices Full period: 1976-2009 (Deloitte, 2009) Much higher levels of correlation compared to previous analysis. AAI ranges from 10% over 20 year period to 45% over last two years. Modern and Contemporary is between 52% and 59%. Old Master is 0. Full period is from January 1976-end of March 2009. 20 year data from March 1989, 10 year data from March 1999, 5 year data from March 2004, 2 yea data from March 2007, and 1 year data is from March 2008.
Recent underperformance of more traditional asset classes - for example, a 23.5% decline in the Dow Jones Industrials, a 37.6% decline in the S&P, and a 67.2% decline in the NASDAQ Composite from December 31, 1999 through December 31 2002
Over the same period a decline of only 5.3% in the art market (using the Art Market Research Art 100 Index, middle 80% price bracket as a proxy for the art market)
12 Month moving averages. Annual Standard Deviation and Annual Average Return (right) (Jan 1976-March 2009) (Deloitte, 2009)
Performance of art relative to equities:1976-2009
An increase across all art market categories of 3% on the previous analysis. From 1975-2004 art returned a total for period of 0.51% ( 6.1% annually)
Driven by the Contemporary art category which rose 166% in 2007.
All art categories peaked in October 2008.
Returns for 2008.
100 index 8%
Returns: January – March 2009
100 index 0%
Returns: End of March 2009 to Nov 2009 all sectors fell:
Old Masters: -6%
Modern Art -30%
Contemporary Art -22%
Portfolio weights (Art 2005) Those average returns after transaction costs would have to increase considerably today (2009) in order for art to be included in an investment portfolio, because art is longer as good a diversification as it was. (B.C,2005)
Wines with a Parker index of over 90 are considered an investment
Fine wines have fallen in value in line with declining City and wall Street bonuses
Berry Bros and Rudd have reduced the value of their wine by up to 40% from last year
Bordeaux and the grands crus classes – premier – cinquieme the 1855 Official Classification of Bordeaux Pomerol St-Emilion Graves Medoc Sauternes Two subs Mouton –Rothschild (1973) First growth Lafite, Mouton, Margaux, Haut-Brion and Latour Super Tuscans Late 1980s Californian Cult wines Napa Valley Burgundy