Turkish art market; market structure, art return as an investment asset and construct an art price index for Turkish art market

This dissertation analyzes the risk and return characteristics, the prospects for portfolio diversification, causality and dependency relationships with traditional investment assets of art investment which is an emerging investment asset in the newly financialized Turkish art market. To aim this, constructed an art price index over the period 1995-2018 quarterly by selecting the best representative 45 painters and their average size, quality and best known era 4.097 paintings sold at auctions in Turkish art market. Index modelled by the price per square centimeter unit of area of the arithmetic average of the total paintings sold in one quarter period for each artist. The results on arithmetic mean of the returns rate in nominal for art investment is %20.39, BIST100 share index is %13.55, gold is %9.79, USD is %8.28 and Treasury Bills is %7.97. Turkish art market performance shows a typical emerging art market that is an upward trend with higher volatility and the returns on paintings and risks are much higher than conventional investment assets. Art investment indicates positive but lower correlation with financial assets and it suggests some diversification potential for portfolio optimization. At lag 2, one side, BIST100 share index Granger cause changes in the Art Price Index shows that art price changes are driven by capital gains that is a strong evidence for the existence of wealth effect. Investors and collectors prefer and pay more for figurative paintings than abstract. There is also the existence of the masterpieces effect but there is no evidence for the death effect in the Turkish art market, the sale rate is %77 at auctions in 2018. Searching the linkages between art market and GDP through variance decomposition and Granger causality, analyses proves that art market shows not a significant relation with GDP and also pairwise correlations indicate no relation between art market and GDP.