Returns and Fundamentals in International Art Markets

This paper documents that international market segmentation affects the price formation of luxury assets. Using data from more than one million auction sales, I construct art price indices spanning from the early 1970s to 2007 for 13 different countries. The variation across countries in annualized returns is substantial. I find that art prices are impacted by global economic growth and stock market trends, as well as by country-specific factors. This paper also provides international evidence that the prices of luxury goods in fixed supply reveal information about the equity premium, in support of Aït-Sahalia et al. (2004).