9 - Investment

Summary

If economics focuses on price representing value, we now shift to finance, which focuses on the connection of risk and return. We begin with the story of Wynn Kramarsky, a collector of works on paper (with his wife Sarah-Ann). Kramarsky’s parents had also owned Vincent van Gogh’s Portrait of Dr. Gachet. We go through a market primer including terminology of asset allocation and the logic of discounting cash flows and performing net present value analysis. We then review art market studies that use repeat sales and hedonic regression methods. The questions of this chapter try to connect the ephemeral, risk-taking, deeply uncertain work that happens in artists’ studios and to track the artwork from there to its status as part of an asset class.