Comparing Art Metrics

If you’re thinking about investing in art, you’ll need to gather performance statistics on global markets, art sector sales, and comparison metrics to make more informed decisions. When looking at art indices, it’s important to consider what they include as well as what they are forced to leave out. Most art indices rely on data from just under half the market — the auction market — since 53% is made up of private gallery and dealer sales, according to TEFAF’s latest report.

As you think about which index to use, it’s important to consider the various methodologies. Which index is able to track liquidity and quantify volatility?

  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: The Mei Moses database includes just 5,000 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.

Methodology: Using this repeat sales data, the Mei Moses Indices track the price difference between each subsequent sale. The index tracks the average return for all works in a given year. The indices include all the repeat sales data available and are not weighted. Bought-in lots are not included.

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.

Source: artnet’s database includes sales from 1,600 auction houses worldwide, including the results of online auctions from the companies that make this information available. These external sites do not include Sotheby’s and Christie’s, although Sotheby’s online-only auctions through its new partnership with eBay have yet to start.

Methodology: artnet organizes auction sales into comparable groups, which includes repeat sales at auction as well as artworks that have only sold once, as long they share enough characteristics with the other artworks in that group. Index values for individual artists within artnet’s market sector indices are calculated based on the median price per lot for each artist within these groups, excluding prints, multiplied by total lots sold for that artist.

3. Arthena Indices

Indices available: Indices that examine trends across three major art market sectors; Emerging, Modern and Contemporary. Arthena utilizes a five year mark for its funds, which ensures liquidity for investors in a traditionally illiquid market.

Source: Arthena maintains a database of 100,000 sales for 150 artists. As our analysts identify other artists whose work has potential as investments, their entire sale history is added to the database. Arthena calculates all auction sales information using buyer’s premium (includes the commission received by the auction house which is paid by the buyer), which is the true sale price. For data that is available with hammer pricing (the amount received by the seller but excluding auction house commission), we appropriately adjust and calculate for the buyer’s premium per auction house.

Methodology: Arthena uses hedonic regression to estimate prices of works in years that they don’t sell. This allows use of all the data available as opposed to just repeat sales. When an artist has enough sales, an individual artist index can be calculated. For artists with fewer sales, a hierarchical regression allows an estimate of his or her works’ performance. Using the Capital Asset Pricing Model, Arthena calculates an alpha and beta for each artist against the whole art market and the S&P 500. The alpha coefficient monitors whether a fund’s returns are adequate for the fund’s risk. The beta coefficient monitors how the artist index moves with respect to the market. We train a classifier to find how historical performance predicts future alphas and add artists with sufficient performance to the Arthena Index. Arthena will not purchase art that is less than 90% likely to be resold.