On the correlation between stocks and art market returns

ABSTRACT

We estimate the correlation between the returns of an S&P 500-based portfolio and Renoir paintings. Unlike previous studies that relied on single-point estimates of the correlation to explore the merits of adding art assets to a portfolio of stocks, we rely on a wild bootstrap algorithm to determine confidence intervals for the correlation estimates. We find that these confidence intervals are so wide (a situation not peculiar to our example) that it seems impossible to make absolute remarks about the merits of adding art-related assets to stocks portfolios. Moreover, our results suggest that previous conclusions regarding the correlation between art and stocks should be taken with some scepticism.

KEYWORDS:

• Art market
• art returns
• hedonic models
• asset correlation
• alternative investments
• bootstrapping
• portfolio diversification

JEL CLASSIFICATION:

• G11
• Z11
• Z10
• G11
• C02

Disclosure statement

No potential conflict of interest was reported by the authors.