Does it pay to invest in art? A selection-corrected returns perspective

A Korteweg, R Kraussl, Patrick Verwijmeren

Research output: Contribution to journalArticleAcademicpeer-review

50 Citations (Scopus)
22 Downloads (Pure)


This paper shows the importance of correcting for sample selection when investing in illiquid assets that trade endogenously. Using a sample of 32,928 paintings that sold repeatedly between 1960 and 2013, we find an asymmetric V-shaped relation between sale probabilities and returns. Adjusting for the resulting selection bias reduces average annual index returns from 8.7% to 6.3%, lowers Sharpe ratios from 0.27 to 0.11, and materially impacts portfolio allocations. Investing in a broad portfolio of paintings is not attractive, but targeting specific styles or top-selling artists may add value. The methodology naturally extends to other asset classes.
Original languageEnglish
Pages (from-to)1007-1038
Number of pages32
JournalThe Review of Financial Studies
Issue number4
Publication statusPublished - 27 Oct 2015

Research programs

  • ESE - F&A


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