Mapping the relationship between the primary and the secondary art market

Abstract

The article endeavours to construct a model that links the gap between returns to an investment in ‘Fine Art’ and the ‘real’ price of the 'Fine Art' being traded. Thus the process used in creating shared value within the market for 'Fine Art' is examined. Art prices are usually set in the primary market through the auction process, which should also typically reflect an efficient way of creating shared value. As the auction process in the primary art market is not efficient; it does not create shared value as would occur in a typical free market structure. Artificial rigidities exist within the primary art market; thus the links between the primary art market and the secondary art market are shown by incorporating the concepts of the 'Value of Information' and ‘Strategic Uncertainty’ into the transmission mechanism.

An examination of the impact of COVID-19 on the financial markets and how this directs investment into the market for fine art

“…From Figure 6, which considers trade in fine art in both USD (column 1) and EUR (column 2), the art market appears to be showing possible signs of forecasted market growth. This is in line with the findings by McAndrew (2012), Kraeussl and Weihenkamp (2012) and Baur and Els (2015) as to what happened previously in 2008 and 2012 and is now happening again in 2020.…”

Sustainable, healthy, learning cities and neighbourhoods

“…In other words, higher returns are associated with higher risk that manifests itself in investor uncertainty and changing levels of volatility. Higher levels of uncertainty increase the 'value' of the information (Baur & Els 2015). Baur and Els (2015) show that as the demand for information increases, the cost associated with holding information by the institution begins to rise, forcing the information to move from the private (institution) into the public (market) domain.…”

Globalisation: Impacts and responses

“…Private information about the art market is unusually vast, even when extending this to the broader impact of foreign exchange and other capital markets. Yet the influence of private information could vary across the different markets (Baur & Els 2015). This process may add to the collective ability of private information, by expanding into expertise or knowledge-based networks.…”

“…But once information moves into the public domain, the price may fall. In other words, the trader will typically buy on rumours and sell as the information becomes known (Baur & Els 2015).…”