On rarity premium and ownership yield in art

In recent years, the art market has been characterized by final auction prices greatly exceeding the ex ante estimates published by international auction houses. We define this difference as a rarity premium and build a Rarity Index by aggregating the premia relative to the mean. We also investigate the benefits, aside from financial performance, associated with art ownership and introduce the term “ownership yield” meant to encapsulate both aesthetic yield and “conspicuous possession.” This ownership yield may account for the large differences between the values of rarity indexes we construct for three famous families of paintings over the period 2003–2013, and those of repeat sales or hedonic art indexes.