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Author (up) Bernales, A; Reus, L.; Valdenegro, V. doi  openurl
  Title Speculative bubbles under supply constraints, background risk and investment fraud in the art market Type
  Year 2021 Publication Journal of Corporate Finance Abbreviated Journal J. Corp. Financ.  
  Volume to appear Issue Pages  
  Keywords Art Markets; Speculative bubbles; Investment fraud; Background risk; Asset supply constraints  
  Abstract We examine the unexplored effects on art markets of artist death (asset supply constraints), collectors' wealth (background risk) and forgery risk (risk of investment fraud), under short-sale constraints and risk aversion. Speculative bubbles emerge and have the form of an option strangle (a put option and a call option), in which strike prices are affected by art supply constraints and the association of the artworks' emotional value with both collectors' wealth and forgery, while the options' underlying asset is the stochastic heterogeneous beliefs of agents. We show that speculative bubbles increase with four elements: art supply constraints; a more negative correlation between collectors' wealth and the artworks' emotional value; a more positive relationship between forgery and the artworks' emotional value; and more heterogeneous beliefs. These four sources of speculation increase the expected turnover rate; however, they also augment the variance of speculative bubbles, which generates price discounts (i.e. risk premiums) for holding artworks. Consequently, the net impact of speculation is not necessarily increased art prices. This study not only contributes to the art market literature, but also to studies about speculative bubbles in other financial markets under heterogeneous beliefs, short-sale constraints and risk-averse investors, since we additionally consider the simultaneous effect of asset supply constraints, investors' background risk and the risk of investment fraud.  
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  Corporate Author Thesis  
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  Language Summary Language Original Title  
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  Series Volume Series Issue Edition  
  ISSN 0929-1199 ISBN Medium  
  Area Expedition Conference  
  Notes Approved  
  Call Number UAI @ alexi.delcanto @ Serial 1281  
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