Speculative Trading and Bubbles: Evidence from the Art Market
2021; Institute for Operations Research and the Management Sciences; Volume: 68; Issue: 7 Linguagem: Inglês
10.1287/mnsc.2021.4088
ISSN1526-5501
AutoresJulien Pénasse, Luc Renneboog,
Tópico(s)Financial Markets and Investment Strategies
ResumoWe argue that extrapolative expectations drive boom–bust cycles in the postwar art market. Price run-ups coincide with increases in demand fundamentals but are followed by predictable busts. Predictable changes account for about half of the variance of five-year price changes. High prices coincide with many attributes of speculative bubbles: trading volume, the share of short-term trades, the share of postwar art, and volatility are all higher during booms. In addition, short-term transactions underperform long-term transactions. Survey evidence further confirms the link between beliefs, prices, and volume dynamics as in models in which extrapolative beliefs fuel speculative bubbles. This paper was accepted by Tyler Shumway, finance.
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