We often hear that one of the advantages of art is that it has a low correlation to the financial markets. Is that true? Does non-correlation exist between art and traditional investments? Does it provide diversification to one’s overall portfolio?
The S&P 500 fell 9% in December 2018 and dropped 4.4% in calendar year 2018. How did the art market fare during this period?
It depends. The art market is comprised of many submarkets, each with its own cycles and return/risk profile so one cannot make generalizations. Old Masters don’t have the same return/risk profile as Contemporary Art or Postwar Art etc.
Peltz International examined the art market to determine the degree of (non) correlation with traditional investments. Three approaches were used – art indices, academic studies, and anecdotal information from dealers and experts in the art community.