Why do we need an art index?
The art index together with the statistics used as the basis for its calculation give an overview of the Estonian art market based on numeric data.The thorough and easily accessible database of transactions will be of great help to everyone on the art market.This database shows the volume of transactions involving works of art in Estonia, the profitability of acquiring Estonian works of art as an investment and the trends on the art market.It takes art as an asset class to a level equal to that of other assets(such as securities and property) that are regularly covered in studies.
What does the index show?
The art index shows the general trends of prices on the art market and works similarly to the stock exchange index.For example, the rise of the art market index by 5 % during a particular period, means that the average increase in the price of the works in the database is also 5 %.It pays to keep in mind that the index reflects the general trends on the market, which is why the value of the index cannot be used to draw exact conclusions about changes in the value of specific works or the works of a specific artist.
How is the index calculated?
The index is calculated using the hedonic regression method. This method presumes that the value of a work of art can be determined on the basis of certain indicators characterising the work (e.g. its size, era and genre). The used method makes various works comparable by subtracting the price of the indicators, that distinguish the works of art, from their direct prices. Hedonic regression has been widely used by researchers in various countries when calculating the art market indices. A selection of scientific articles, that outline the theoretical background to the calculation of the art market price index and cover the calculation of the price indices of different art markets, can be found here. The Estonian price index has been calculated on the basis of indicators that characterise works of art, such as era, medium, material, the manner of conducting the transaction, theme, the gallery that carried out the transaction, the size of the work and the existence of a signature.
About the index creation project
The project to create the price index of the Estonian art market has received support from the European Regional Development Fund via the project ‘Development of Estonian Contemporary Art Companies and Increasing Export Capacity’ of the Estonian Contemporary Art Development Centre. The theoretical basis for the calculation of the index is based on Riivo Anton’s Master’s thesis ‘The Rate of Return on art investments: the case of Estonia’. The collection and analysis of the data used as the basis for calculating the index were coordinated by Civitta Eesti AS. The entire project team would like to thank everyone who has helped to create the index.
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