Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/149620
Authors: 
Kräussl, Roman
Mirgorodskaya, Elizaveta
Year of Publication: 
2016
Series/Report no.: 
CFS Working Paper Series 564
Abstract: 
We investigate the effect of overreaction in the fine art market. Using a unique sample of auction prices of modern prints, we define an overvalued (undervalued) print as a print that was bought for a price above (below) its high (low) auction pricing estimate. Based on the overreaction hypothesis, we predict that overvalued (undervalued) prints generate a negative (positive) excess return at a subsequent sale. Our empirical findings confirm our expectations. We report that prints that were bought for a price 10 percent above (below) its high (low) pricing estimate generate a positive (negative) excess return of 12 percent (17 percent) after controlling for the general price movement on the prints market. The price correction for overvalued (undervalued) prints is more pronounced during recessions (expansions).
Subjects: 
overreaction
winner's curse
pricing estimates
repeat sale
auction
art market
JEL: 
E32
G11
G14
Document Type: 
Working Paper

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