4. Empirical Results and Discussion
4.2 Hedonic regression
4.2.1 The baseline hedonic regression
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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]
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The work’s characteristics concern several attributes of work itself, such as the authenticity of painting (e.g., Dated, Signed, Provenance, Celebrity, Exhibition, and Literature), mounting types of the painting (e.g., Album of paintings, Banner paintings, Handroll, Fans, etc.), and size.
The authenticity of artwork begins with Dated and Signed. Dated determines the creation time of the artwork and Signed is expressed as the ownership of the artwork. These two variables add the element of authenticity of the artwork. For example, experts can use the technical analysis to evaluate the age of the materials used in the painting according to the creation time of artwork, distinguishing the original from the copy. The Signed shows the ownership of the artist. In table 4, the coefficient of Dated is 0.335, indicating that a dated artwork is 39.777 per cent more expensive than an undated one. The Signed is 26.717 per cent, which is more expensive than the unsigned one. The results are consistent with Renneboog and Spaenjers (2013), who presented that Dated and Signed commanded the high premiums (especially for less-ended artwork).
The authenticity also involves the variables of Provenance, Celebrity, Literature, and Exhibition. The Provenance provides the origin for the artwork and refers to the auction records, conservation records, and certification. The reliable records of provenance guarantee the authenticity of the work, which provides the investors’ reassurance relating to its value (McAndrew, 2010). The current research shows that the artwork with the records of Provenance commands a premium with 30.607 per cent over non-provenance ones. In line with McAndrew (2010), provenance has a significant influence on the value of an artwork because it provides the element of authenticity on artwork.
Along with provenance, Celebrity inscription can track the history of ownership of the work.
It refers to the inscription written by the artwork’s various owners, that is, the owner uses his seals or writes a short piece of text on the artwork to indicate his ownership and appreciation of the
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work. The investors or experts can verify against the stock of paintings held by the same collectors, where available. This research shows that the artwork with Celebrity is 35.051 per cent more expensive than celebrity one.
The documentation registered in established sale catalogues also can guarantee the authenticity of the artwork (McAndrew, 2010). The sales catalogues in current research are the inclusion of the Exhibition and Literature. Table 4 shows that Exhibition commands the high price premium (149.009 per cent). Similar to results found in the empirical literature (Fedderke & Li, 2019;
McAndrew, 2010), artwork can be exhibited to be closely related to its high quality and reliable authenticity, therefore, it carries a high premium. In terms of Literature, the result indicates that literature is associated with 68.720 per cent price premium. Literature reveals the intrinsic artistic value, historical prestige, and proof of previous ownership for the artwork; thus, it significantly contributes to the art prices.
In terms of mounting6 group, the artworks mounted at Albums and Handroll command high prices, with percentage increases over the standard work of 93.841 per cent and 79.406 per cent.
The high premium of Albums and Handroll might be an association with its form (Ding, 2008).
The Chinese paintings are not always hung on the walls for display, while Albums and Handroll can be rolled up and bought out for special enjoyment. This mounting style might be better to protect the paintings. Besides, Albums usually consist of up to twelves folded pages, each page needing the artist to create the painting and calligraphy together, which increases its artistic merit and collective value (Ding, 2008). The results show that Fans report a price discount (-47.641 per cent). This negative result might be related to its material, Fans are usually made of stiffened silk mounted on bamboo, and the condition is easy to damage due to the poor absorbency and creasing.
6Chinese painting is mainly executed on Xuan paper, which is soft and thin, and the artist invents a mounting which is good for preservation and appreciation.
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Therefore, the material of fans may negatively affect prices (Liu, 2009). This is the first research to have found the correlation between the mounting and art price, further research needs to confirm these results.
The prior evidence on size suggests that the prices increase with size but decrease as the size increases. Therefore, the current hedonic regression includes the size and size square to measure the extent of the piece of artwork. Table 4 shows that the coefficient with the size is positive, while the coefficient with the size square is negative.
The final set of variables is about the sales’ characteristics, including the sales venue and auction date. The result shows that the artwork sold at Sotheby’s and Christie’s substantially yields the higher prices, compared to artwork sold at the other auction houses. This result is consistent with the previous literature (Agnello & Pierce, 1996; Fedderke & Li, 2019; Renneboog &
Spaenjers, 2013), Sotheby’s and Christie’s have a high reputation and market power, and they can attain high-quality artwork and can exhibit the exhibition at the prestigious museum. Considering the auction month, the artwork tends to increase the prices in May, June, November, and December.
Sotheby’s and Christie’s, always holding the important auctions and selling the most precious artworks around these months, with other auction houses following their practice (Agnello, 2002;
Renneboog & Spaenjers, 2013a; Worthington & Higgs, 2004).
[Insert Table 4 here]
4.2.2 Dynamics change of Price determinants of hedonic characteristics in the long-run