Evaluating Art Auction Results Pt. 2 – artmarketblog.com

Evaluating Art Auction Results Pt. 2 – artmarketblog.com

auctionIn Evaluating Art Auction Results Pt. 1 (see here) I began to take an in depth look at how people interpret auction results and exactly what it is that determines whether an art auction has been a success or not. Continuing on from that post I want to take a closer look at the different statistics that are used to determine whether an art auction has been a success or not and exactly what each of those statistics can tell us. I will conduct this analysis over several posts as the whole subject of art auction statistics is rather more complex and complicated than it would appear to be.

1. Percentage of lots sold by number:

The total number of works sold compared to the total number of works offered for sale is a widely used statistic that can be useful when analysing an auction but only when compared with statistics from similar auctions or, when the difference between the two auctions being compared is taken into account. By a similar auction I mean an auction that has a similar number of lots, the same type of art, estimates of a similar range and works of a similar price range. Just looking at the sold by lot percentage of a single auction doesn’t really tell us much about how successful an auction was because there are a number of factors that are able to be manipulated by an auction house to alter the chances of selling a higher percentage of offered lots.  There are also other statistics that can result in two auctions with the same sold by lot percentage having different levels of success (or failure). As an example of the problems related to the use of the sold by lot percentage as a sole indicator of an auction’s success, if someone were to reach a conclusion that an auction which took place that had the following statistics (auction 1) was a huge success because of the high percentage of lots sold:

Statistics for auction 1 (2009)

Number of lots: 20
Sold by lot: 80%
Sold by value: 80%
Total value: $20,000,000

but this person had failed to look at the statistics for the same sale by the same auctioneer for the previous year (auction 2) which had the following statistics:

Statistics for auction 2 (2008)

Number of lots: 80
Sold by lot: 80%
Sold by value: 80%
Total value: $120,000,000

the person’s conclusion that auction one was a huge success would be questionable to say the least because although the percentage of lots sold is the same for both sales the previous year’s sale had a higher total and a higher average sale price. The significance of this is that an auction house is a business that has to make a certain amount of profit to continue operating and achieve a certain level of financial success to retain people’s confidence in the business. The auction house would have made more profit from the previous year’s sale even though the sold by lot rates were the same which means that from the auction houses point of view, the previous year’s sale would have been more successful because it made them more money.

By reducing the number of total lots being sold at an auction, reducing the estimates and limiting the works that are included in the auction to those that are most likely to sell, an auction house can reduce the likelihood of a low sold by lot percentage. This is exactly what has happened with the auctions that have taken place so far in 2009 as auction houses attempt to keep up appearances in a much more conservative and challenging market. So far this year there have been several sales that have achieved very good sold by lot percentages as a result of changes made by the auction houses to their auctions which I will discuss in more detail as this series of posts progresses.

The fact that it is virtually impossible to analyse one of the statistics without referring to another statistic suggests that there is an important relationship between the various different art auction statistics. Each of the different statistics can tell us something different about an auction but only when each of those statistics are analysed together and the results of that analysis viewed in the wide context of past results with the current market conditions taken into consideration.

There is no doubt that achieving a high sold by lot percentage is a positive achievement regardless of whether or not an auction house has altered a sale to increase the chances of better figures and regardless of whether the results from a comparable sale are better overall. It is important, however, to recognise that a high sold by lot percentage doesn’t necessarily mean that an auction was a massive success.  As I have shown above, art auction results are not as simple or as clear-cut as they may appear.

to be continued……

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

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