The performance of contemporary art as an investment good

The art market has been the subject of academic research for decades. Research topics vary from art returns to the drivers of art prices to the relationship between the art market and the stock market. The limited accessibility of art sales data and the heterogeneity of artworks make it difficult to come to a conclusion on any of these issues. Scholars therefore come up with a variety of methods to overcome the data problems. One of these methods is an advanced application of the Hedonic Pricing method, called the Heckit model. This model decreases the selection bias that occurs in art market research by including non-sales in the sample. This thesis uses the Heckit model to obtain the Conceptual Art Index (CAI). The CAI is used to research the relationship between the Conceptual Art market and the stock market in the UK from January 2000 until October 2014. Prior researches have shown that there is a lagged relationship between the art market and financial markets. This thesis does not provide results that proof the existence of this relationship. The results show that there is no significant short-term relationship between the Conceptual Art market and the UK stock market. There is evidence indicating a long-term relationship, but the evidence is weak. Besides that, comparison of the CAI with an index obtained with a traditional Hedonic Pricing model shows that there is no significant selection bias occurring due to non-random selection. This latter result indicates that the Heckit model is not superior to the traditional Hedonic Pricing method. This thesis provides input for further research on the added value of the Heckit model as well as on the relationship between the art market and financial markets.