Index creation for individually unique objects like residential real estate and art requires a
different approach than used for an index of stocks, bonds and commodities. This is due to the
infrequency of trading and differences in the characteristics of the objects that come to market
from period to period. Thus for art and real estate an index based on average prices over a
period of time may be more dependent on the mix of objects that come to market rather than
changes in the underlying market itself. A database of repeat sales of the same object resolves
this issue.
For the last ten years we have reported on the Mei Moses® family of art indexes based on a
proprietary database of repeat sale pairs created from transactions in the United States art
auction market, principally the New York auction houses. Since 2007 we expanded our ongoing data
collection to include Europe and recently added data from art transactions in China and historical
information from THE EUROPEAN FINE ART DATABASE created by Prof. Rachel Pownall. Together these
additions expanded our original database by more that 14,000 repeat sale pairs for objects resold
in Europe and China. The new combined database now contains a total of over 30,000 repeat sale
pairs for approximately 20,000 individual works of art. We believe it is the largest database for
deriving financial returns actually achieved from transparent transactions in individual works of
art. Beautiful Asset Advisors® LLC will continuously update this information as sales at
Sotheby's and Christie's take place around the world for art in the collecting categories we cover.
We expect to add approximately 3,000 repeat sale pairs to our database each year. The database
now contains sufficient observations to develop our new annual world all art index commencing in
1810. We use a statistical methodology to create our indexes which is similar to that developed by
Professors Case and Shiller for their residential real estate index published by Standard and Poor's.
To insure transparency for our art indexes we only collect data based on public auction results. The
database was compiled from information in the catalogues for auctions held by Sotheby's and Christie's
(and their predecessor firms) throughout the world for various time periods from 1925 through 2011
(Since we can only analyze what is knowable our data does not include "bought-in" paintings that did
not sell due to the fact that the bid was below an unknown reservation price) for the following art
collecting categories: American before 1950, 19th Century and Old Master, Impressionist and Modern,
Post War and Contemporary, Latin American, British after 1850, and Traditional Chinese works of Art.
If a painting's provenance included a prior public sale, we use our best research efforts to obtain
the consummated prior purchase price at any auction house, anyplace in the world and at any date. If
the object has been held for at least a year and we have successfully found both the sale and purchase
prices including the relevant buyer's premium we include it in our database. Thus, we introduce no
subjective sample selection bias.
We relied primarily on the New York Public Library, the Watson Library at the Metropolitan Museum of
Art, the auction houses' online reports, and various online transactional auction art websites, for
auction price histories. Some objects had been sold a number of times over the years, resulting in
up to seven repeat sale pairs for some works of art. The average auction interval between purchase
and sale in our data base is 22 years. Each resale pair is a separate entry in our database. Some
of the original auction purchases dated back to the 17th century.
If the art piece was purchased
outside the country where the sale was consummated, we converted the purchase price into the currency
of the sale location using the long-term exchange rate data provided by Global Financial Data. Global
Financial Data also was the source for other historical economic data and financial indexes used for
our comparative analyses of financial performance. In particular, we use the U.S.-based Standard &
Poor's 500 total return index (S&P 500 TR) and the U.K.-based Financial Times All Shares total return
index (FTAS-TR).
We gather data continuously on the world art market from Sotheby's and Christie's auction houses. For
the major art collecting categories we follow we search the current sale catalogues for items that have
sold that had a prior auction purchase. We add about 3000 new pairs each year.
We intend to publish the new value of the Mei Moses® World All Art annual index during the first week
of January of each year. Using newly collected data, we update the index with a monthly tracking report.
Information on historic performance of our indexes is available to registered premium users of this
website. For customers interested in a more detailed description of the data and methodology please see
our article, Art as an Investment and the Underperformance of Masterpieces, in the December 2002 issue
of the American Economic Review.
Since our indexes are annual indexes, for consistency, we assume that all purchases and sales take place
on the last day of the year. To obtain statically meaningful results, we have found an annual time period
to be the shortest time period that is feasible. The statistical methodology used to create the indexes
requires substantial and uninterrupted data in each time period.
In general, and this year in particular, many art market participants would like to have some information
on the tenor of the market during the year. To try to satisfy this demand, we decided to issue periodic
index tracking updates during the year. We are now getting sufficient, and timely, incremental data
during a year so that at periodic intervals we can recreate our indexes with the sales that have
transpired during the year up to that date. We treat the sales in each successive year-to-date period as
if they represented transactions for a full year.
These tracking values assume that no additional repeat sale pairs would be added to our database between
the end of the relevant tracking period of the year and the end of the year for each collecting category.
The latest tracking information is also available to premium members of this website.
We intend to issue these tracking reports monthly for the world all art index, quarterly for our four
world collecting category indexes and semi annually for our three regional collecting category indexes.
This approach is for tracking purposes only. We are not now providing and do not intend in the future
to publish, long term return, risk or correlation studies based on this tracking information. We have
not studied whether these interim tracking results are good or bad predictors of the final year end
index values.
We must also point out that prior performance of our indexes is no guarantee of future results. We are
not financial advisors or in the business of recommending art as an investment. Investment decision
should be based on the risk return tolerance and time horizon of the investor with, if desired the
support of a licensed financial advisor. This information and the information on our website is provided
"as is" and no representations or warranties either express or implied of accuracy, merchantability,
fitness for a particular purpose or of any other nature are made with respect to this information or to
any expressed views presented in this information.