Is flight-to-safety in the art market real? Evidence from the 1929 financial crash

ABSTRACT

We study the impact of the 1929 stock market crash on the Paris art market by creating a high-frequency index of artwork sales to measure the arrival of new investors seeking safe-havens. The results show that following the financial crash, the previously volatile art market becomes suddenly stable, suggesting a flight-to-safety from financial markets to the art market.

KEYWORDS:

• Art market index
• 1929 crash
• hedonic price index
• flight-to-safety
• Paris Bourse

JEL CLASSIFICATION:

• D44
• G10
• G14

Acknowledgments

The authors thank Eugene White, Kim Oosterlinck, Janel Siemplensky and Angelo Riva for their constructive comments. Thanks to Caroline Radenac, Isabelle Decise, Lea Boghossian and Henrique Bagatim for their help in collecting the data. We appreciate the comments of the anonymous referee which largely improved the paper and its discussion section.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ For a review of earlier studies, see Mei and Moses (2002) and Öztürkkal and Togan-Eğrican (2020).

² After almost four centuries, the monopoly of commissaires-priseurs was finally abolished in 2001.

³ Öztürkkal and Togan-Eğrican (2020) built the index of Turkish art market index between 1994 and 2014. Their results show weak evidence for the art market being safe-haven. In the same way, considering the French art market during WWI and the postwar period (1911–1925), David (2014) did not find evidence supporting art as a safe heaven. Finally based on an art price index for South Africa over the period 2000–2013, Botha, Snowball, and Scott (2016) find no evidence showing that art is a good way to diversify an investment portfolio.

⁴ This method is also known as Characteristics Price Index (Triplett 2006).

⁵ However, we have not found any notice directly confirming this hypothesis in the records on the studied period (Rheims 1975; Level 1959).

⁶ Atomicity along with transparency, homogeneity, free entry/exit and perfect mobility compose the five criteria for a perfect competition (Tymoigne and Wray 2014).