FIN-02-039 |
NYU Stern School of Business |
October 2002
Jianping Mei and Michael Moses
ABSTRACT
This paper constructs a new data set from art auctions that include auctioneer presale
price estimates to examine the credulity of art investors. While auction houses typically made no
price estimates before 1973, they start providing high- and low- price estimates for all artworks
thereafter. Thus, we have a natural experiment to observe changes in price behavior under the
influence of auctioneer estimates. We find that the price estimates tend to have an upward bias
for expensive paintings and high estimates at the time of purchase are associated with adverse
future abnormal returns. These results are consistent with the view that investors are credulous.
They do not discount fully the strategic incentives of auctioneers. However, we have some
preliminary evidence that investors may have made some adjustment recently for the systematic
bias in provided information.
Jianping Mei
Institution: Stern School of Business, New York University, 44th West 4th Street, New York, NY 10012
Telephone: (212) 998-0356
Fax: (212) 995-4233
Email: jmei@stern.nyu.edu
Homepage: http://www.stern.nyu.edu/~jmei
Michael Moses
Institution: Stern School of Business, New York University, 44th West 4th Street, New York, NY 10012
Email: mrichard@stern.nyu.edu
Homepage: http://www.stern.nyu.edu/~mmoses
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