When you think about art indices, you need to consider carefully what they choose to include as well as what they are forced to leave out.
While making a laudable attempt to bring transparency to the opaque art market, they have always been hobbled by the lack of sales data available. All of them rely on data from just half the art market – the auction market – when 53% of the global art market is actually made up of private gallery and dealer sales, according to TEFAF’s latest report.
Typically, they also track the most successful art sales at auction, in some cases, artworks that have successfully sold at auction more than once, while omitting artworks that fail to sell at auction (around one quarter of lots). As Georgina Adam points out in her new book ‘Big Bucks: The Explosion of the Art Market in the 21st Century‘, “if 10 Warhols are offered for sale, nine are bought in [fail to find a buyer or meet the unknown reserve price] but one triples its estimate, then performance indices would record a fine result”.
Barnett Newman’s Black Fire I that sold for $84.1 million at Christie’s last November. Art indices focus on the best performing part of the auction market.
Not all indices include atypical results. Art Market Research, for example, allows subscribers to create their own indices that cut out the top and bottom outlier results at auction, but Mike Moses, co-founder of the Mei Moses Art Indices, agrees that buy-ins are a particular challenge. “Every index provider faces the same problem of how to deal with buy-ins,” he says. “There’s no way to assign any value to these lots, other than making up a price.” I should add here the obvious fact that no art indices take into account all the art that is never deemed valuable enough to be resold in the first place.
These are thorny problems, but if you use art market indices to assess whether art is a good investment, you’re making investment assumptions about a market where half of the data from private sales is unknowable and where the tranche of data that indices do include from the other half, the auction market, has a selection bias.
The fact that many of the sales prices that result from online auctions are not published suggests that the data art indices rely on are becoming less representative of the broader market than before. Selling art online is “leading to less, not greater transparency in the market, running counter to the freer access to price data that the internet was supposed to foster,” writes Adam. “Couple this with the growing number of private sales by auction houses, then comparing prices is likely to become less easy, not more so.”
As you think about any art market index, it’s important to consider the very different methodologies they use to tackle a market where all artworks are unique, but also the usefulness of their underlying data, so this seems like a good time to outline what some of the main art indices do and don’t include.
I’m also including the latest year-to-date results from each providers’ post-war and contemporary art indices below, where that is available, as a point of comparison.
1. Mei Moses Indices
Indices available: Mei Moses publishes one World All Art Index and seven indices representing different collecting categories. All of them are updated annually, although Mei Moses will soon publish a semi-annual update for the World All Art Index. Mei Moses also issues quarterly tracking estimates for these indices, based on new results so far during the year.
Source of underlying data: To try to make useful comparisons in a market in which all artworks are unique, the Mei Moses database only include artworks that have sold more than once, using data collected from two companies, Sotheby’s and Christie’s, but not their online sales. The Mei Moses database includes over 45,000 repeat sale pairs for over 20,000 individual works of art sold around the world. Around 3,000 to 4,000 new repeat sale pairs are added each year, and while the data about repeat sales is just gleaned from Sotheby’s and Christie’s, the auction venue where the artwork sold in the first place can be anywhere.
Index methodology: Using this repeat sales data, the Mei Moses Indices track the price difference between each subsequent sale. The indices include all the repeat sales data available and are not weighted. Bought-in lots are not included.
Performance of the Mei Moses World Post-War and Contemporary Index: down 0.47% from January to July 2014.
2. Artnet Indices
Indices available: Indices that monitor the performance of various market categories, such as contemporary art, Impressionist art and modern art. Subscribers can also access artist-specific indices or indices devoted to a subset of that artist’s work.
Pages: 1 2
