Investing in art movements: The case of Surrealist Paintings

The authors analyse the performance of an art investment by applying a price index based on auction house prices. They examine the evolution of one segment of the art market – Surrealist paintings – and compare it with the risk-return profile of alternative asset classes. They find that the prices of Surrealist paintings not only increased more than inflation during the period 1990–2006 but were higher than the return on more traditional asset classes such as (large-cap) stocks and bonds. On a risk-return adjusted basis, investing in specific segments of the art market proves to be similar to investing in small-cap stocks and real estate. Investing in a highly specialized art movement may thus yield more attractive returns than is suggested in the literature. The authors conclude that a policy of selecting an appropriate art movement could provide interesting returns for investors and enhance their portfolio diversification.