Mei Moses Art Market Index Update – artmarketblog.com
A tracking report on the year-to-date value of the Mei Moses All Art Index has been issued by Beautiful Asset Advisors. According to the fall art market insight report, as of 10/31/2008, the value of the index was 270.58** which, as one would expect, is down on the 2007 year end value of the index which was 279.42. Although the value of the index is published annually, according to the people at Beautiful Asset Advisors® LLC who calculate the index “We are now getting sufficient incremental data during a year so that at periodic intervals we can recreate our index with the sales that have transpired during the year up to that date. If we assume that these periodic sales have taken place at the end of the year than the index numbers we would get would be the ones that would be achieved at the end of the year if no additional information was collected. We have employed this technique to generate the summer and fall tracking results.
For those of you who haven’t heard of the Mei Moses Index before it is basically a number that represents the rate of return of fine art for a particular year. The rate of return can basically be defined as the annual percentage return realized on an investment. If you haven’t heard of the Mei Moses Index before or have heard of the index but wondered how it is calculated then read on. The Mei Moses index is calculated using data collected from repeat sales of the same work of art which is then used to determine the annual return of that particular work of art. For example, if a painting was purchased in 1990 for $50,000 and then sold in 2000 for $150,000 the total return would be 200% over a 10 year period which could then be broken down to 20% per year. The problem with using the average increase in value per year calculated from the total increase in value according to the two sale points is that the assumption is being made that the work of art increased (or decreased) in value by the same percentage each year which would not be the case. To combat this problem the Mei Moses index uses a special formula to determine as accurately as possible the yearly increase (or decrease) in value.
A simplified example of how the index is calculated is given by Matthew Spiegel who is a finance professor at Yale university. Spiegel’s example is:
Painting C sells in years 1 and 3 and during that time returns 5% per year (10% total for two years). Painting D sells in years 2 and 3 and returns 3% (3% total for one year). The repeat sales index would start by estimating the return from years 2 to 3 at 3% in order to perfectly fit the return on painting D. Given this it would then estimate the return to art from years 1 to 2 at 7% (3%+7% equals total of 10% return as per return of painting c), which will then allow the model to also fit the return to painting C. The index would then have the following values:
Year 1: 100
Year 2: 107 (+7%)
Year 3: 110.21 (+3%)
Spiegel emphasises that “This is a very simplified example and hides quite a bit of the mathematics involved when there are many more paintings” In other words, when calculating the index using 13,000 repeat sales things get rather more complicated.
At the current time the Mei Moses index database has approximately 13,000 repeat sale pairs to which approximately an additional 1000 pairs are added each year. According to the creators of the index, JIANPING MEI & MICHAEL MOSES, “To insure transparency for our art indexes we only collect data based on public auction results. We gather data continuously on the New York art market from Sotheby’s and Christie’s auction houses and have gone back to 1925 to start our analysis. If the object has been held for at least a year and we have successfully found both the sale and buy prices including the relevant buyer’s premium we include it in our database”
To read the full fall market insight report go here:
and for more information on the index go here:
**This value incorporates sales which occurred this year as of the above date and which will be included in the year end value of the All Art Index. The tracking value of 270.58 DOES NOT include sales that have occurred SINCE 10/31/2008 or WILL OCCUR in the balance of the calender year.
**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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