Hedonic price index for Polish art market in 2007-2013

During global financial crisis major fluctuations in prices of various assets can be observed. This is one of the important reasons of  increased interest in alternative investments such as artworks. The world literature on investing in the art is quite rich, although studies of young markets, such as Polish art market, are missing.

The study has been designed to construct Polish art price index with the use of different regression model specifications, and with two different methods of index calculating, i.e. the time dummy variable and characteristics price index method. The hedonic regression model is used to construct these indexes with the use of 2,224 auction records of 22 most important Polish painters. The data were obtained from Polish auction houses and covered the period 2007 - 2013. The estimation of hedonic regression models has proved that there are some features of the artwork that are associated with a higher price, i.e. medium, subject, auction house, surface, and signature tend to influence the price positively and significantly. The name of the artist is also significant and has a negative effect on the price, as all investigated painters sell artworks cheaper than the reference artist. Painter’s living status and relation between hammer price and reserve price seem to have no significant influence on prices of paintings.

The research has proved that the model specification does not play a significant role in hedonic price index determining, especially in the case of the indexes obtained with use of the time dummy variable method. The formula of index construction seems to be of much bigger importance. Both indexes, i.e. constructed on the base of time dummy variable method and on the base of characteristics price method have directionally congruent course, although the dynamics of the time dummy variable index is greater.

Key words:

hedonic price index, hedonic regression model, art market