4. Empirical Results and Discussion
4.1 Summary statistics .1 Hedonic data sample
Table 1 describes summary statistic for hedonic regression. The hedonic model includes 171,941 sold lots executed by 580 Chinese artists from 2000 to 2017. The hedonic variables are classified into artists’ characteristics, work’s characteristics, and sales’ characteristics.
The artists’ characteristics include the variables of Name of artist, Deceased, and Mentorship.
As mentioned in the 3.3.1 Characteristics of the artists. The current research classified the artwork into the different artist’s movements and artist’s types according to period and types corresponding to each artist. In the Artist’ movement, the artworks from the Modern period consist of the mainstream in the Chinese art market. In the Artist’s type, Non-oils accounts for 96 per cent of the total sample, and mean price of Oils (CNY 4,175, 000) far exceeds that of Non-oils (CNY895,000).
In terms of Deceased, the number of observations of Deceased shows that more than two- thirds of artists have died. The ancient and modern periods ended many years ago, thereby the majority of artists have passed away (Shi et al., 2018). Regard with Mentorship, the number of observations on this variable shows that half of the artists have learned from the famous teacher.
The works’ characteristics consider a range of variables associated with the authenticity, mounting catalogue. As mentioned in 3.3.2 Works’ characteristics, the authenticity group is the inclusion of the variables of Dated, Signed, Provenance, Celebrity, Literature, and Exhibition. In the authenticity group, the number of observations for Signed, Celebrity, Literature, and Dated are 151,953, 14,318, 10,808, and 90,837, respectively, while the number of observations on Provenance and Exhibition are far below than the above variables, with 26,946 and 7,734, respectively. However, the mean price of Exhibition is among the most expensive, followed by Provenance, and Signed is the least expensive (see results in Table 1). Consider the Mounting group, the artwork mounted in Vertical drawing consists of the mainstream in Chinese art.
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Sales’ characteristics contain the variables Auction houses, Auction months, and Auction years.
In the auction house group, the artwork sold at Sotheby’s and Christie’s yields higher prices than artwork sold at the other auction houses. These two leading auction houses have the highest reputation and market power, dedicating their effort to sell the most expensive and best artworks (see 2.2.2 price determinants of hedonic characteristics of artwork). For Auction month, the high price of the months is in May, June, November, and December, with observations of 22,004, 29,467, 26,987, and 34,347, respectively.
The variable of year in sales’ characteristics record the year in which the work of art was sold.
The results in Table 1 show that the Chinese art market has experienced two boom periods. The first boom period was from 2003 to 2005, the mean price was CNY 997 million in 2003, and the price of the Chinese art market rose gradually increased, reaching CNY 7,192 million in 2005. The second bull period was from 2008-2011. The mean price of 2008 was CNY 5,339 million in 2008, and the market peaked in 2011 with sales of 31,641 million in CNY. However, the prosperity of the art market suddenly ended in 2012. The market share dropped to CNY 11,247 million in 2015.
After the downturn in the art market, the Chinese art market adjusted its construction, which focused on “Quality seeking” rather than “Speed seeking” (see 2.1 the history of the Contemporary Chinese art market). Therefore, the market recovered after 2016, and turnover in 2017 increased to CNY 16,173 million.
[Insert Table 1 here]
4.1.2 Repeat sales datasample
Table 2 summarizes the descriptive statistics of 4,750 repeat records used in the repeat sales regression. The repeat sales records are classified into three categories: Art movement, Art types, and Horizon of the investment.
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Table 2 shows that Modern and Non-oils consist of the mainstream in the repeat sales records.
The average holding period5 in the art movement is 3.5 years. The average holding period in the art types is similar to the art movement. In addition, the results show that repeat sales artworks focus on the high-end art market.
In the Investment horizon group, the criteria of the holding-time classification follows Park et al. (2017). Holding periods from one to two semi-annual are classified as short horizon (denoted Short), with those from three to six semi-annual are categorized as the medium horizon (denoted Medium), and those over six semi-annual are categorized as the long horizon (denoted Long). The observations from these three horizons take up 25%, 36%, and 39% of the total sample, respectively.
The average holding period of the short-horizon is one year, and the long-horizon group is over six years. By contrast, the average holding time of repeated resale records in the American art market is around 28 years (Mei & Moses, 2002) and the minimum time of the repeat sales record in South Africa is 20 years (Fedderke & Li, 2019). In addition, Mei and Moses (2002) used 4,896 pairs sales over a period of 125 years. Goetzmann (1993) obtained 3,329 pairs of repeated records over the period of 271years. Frey and Pommerehne (1989) contained 1,198 repeat sales over the period of 352 years. The repeat sales records in the Chinese art market far exceed the other art market, and the Chinese art market has a relatively short holding period. It is argued that the reason for this is that high-frequency trading in the Chinese art market leads to a shorter holding period of artwork and more records of repeat sales transactions.
[Insert Table 2 here]
5 hold period is the time between two adjacent resales.
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Table 3 summarizes the descriptive statistics for 67 repeat sales transactions. The repeat price index is defined on a semi-annual basis, but the holding period of 67 repeat sales records is less than half a year, which cannot construct the time dummy variable for them. Thus, the current research excludes 67 repeat sales records from the regression. Nevertheless, the data contains a wealth of information. For example, the average hold period in 67 repeat sales transactions is only 3.5 months and the real rate of the monthly return reaches 17.86 per cent. The results imply that high-frequency trading in the Chinese art market leads to a high return on art investment.
[Insert Table 3 here]