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| Artful Beginnings |
A Less Dismal Science
08/02/2004
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Annual sales of art amount to $10 billion in the United
States alone, according to various industry estimates. In the past several
years, consultants and economists have turned their sights to the problem of
tracking this sector’s investment performance. Research by Jianping Mei and
Michael Moses, professors at NYU’s Stern School of Business, and firms such as
Art Market Research in New York, Kusin & Co. in Dallas and Gabrius in Milan,
shows that art can complement equities, bonds and other more traditional
investments because its price movements are not correlated with those of
financial assets.
 One thing is clear: fine art appreciates over time, and
may outperform equities in some instances. The Mei/Moses All Art Annual Index
tracks the auction prices of 6,000 pieces of art, including pre-1950 American
paintings, Old Masters, 19th-century masters and Impressionists. Last year, the
Mei/Moses index rose 21.7 percent. Equities fared better: the S&P 500 rose
28.7 percent. Longer term, the art index shines. The Mei/Moses benchmark had an
annualized compound return of 12.6 percent over the past 50 years, beating the
S&P 500’s 11.7 percent. The gains are not only in aggregate measures, of
course. Moses—himself a collector of what he terms “representational American
painting” from the second half of the 20th century—notes that Boy with a Pipe
outperformed the market, posting an average annual return of around 16.5 percent
since Betsey and John Hay Whitney bought it in 1950 for $30,000. Alternatively,
the two Edgar Degas racing scenes from the same lot returned 8 percent per year
for their owners. 
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