Construction and estimation hedonic regression for selected Polish painters

The financial market situation leads investors to look for alternative investments to diversify their portfolio. A relatively new approach toward investing is to consider pieces of art as investment instrument or collateral. Aspects of the art market and art investment are discussed in well-known universities such as: New York University, Yale School of Management, University of Chicago, Princeton University, and significant papers on this subject have been published in The Journal of Arts Management, Law and Society; The Journal of Wealth Management; The Journal of Economic Perspectives; Journal of Cultural Economics, etc. Though some researchers in Poland are also dealing with Polish art, there are only a few papers considering art as alternative investment instrument. Therefore the goal of our research is to fill this gap.

The art market in Poland is characterized by a limited scale. Wealthy people prefer to invest in luxury cars, watches, or yachts rather than art since their knowledge about paintings in general and about investment in art is insufficient. During preliminary research we found out that it is necessary to construct the hedonic art price index of Polish paintings on the basis of data from the auction market for paintings in Poland. Such an index can be evaluated by the method of a two-stage hedonic regression, which is a method for estimating an approximate value of a work of art adjusting the average price of the artist’s works for the qualitative characteristics which are incorporated into the hedonic model.

The aim of the paper is the construction and estimation of hedonic regression for selected Polish painters based on data from auctions of paintings held by auction houses and foundations in the years 2007 – 2010. We construct several models for different samples of paintings that are selected according to different criteria.