What an Artist Price Index Can and Cannot Tell You

⁰¹An art price index takes a set of transactions over time and produces a single series intended to represent how prices in that category have moved. Every step of that involves choices: which works qualify, how the differences between them are adjusted for, and what to do with works that failed to sell.

⁰²The output looks like a share price. The underlying reality is a series of unique objects sold in varying conditions to varying buyers, which is a fundamentally different thing from a fungible security.

⁰¹Repeat-sale methods track works that have sold more than once, which controls well for quality but only covers the small subset of works that resold — and works resell for reasons that are not random.

⁰²Hedonic methods model price against attributes such as size, medium, date and subject, which uses far more transactions but depends on the model capturing what actually drives value. Quality, in the sense that determines why one canvas is worth several times another from the same year, resists being modelled.

⁰³Average and median approaches are the simplest and the most easily distorted: a single exceptional lot can move the average for an entire category.

⁰¹Two omissions matter more than any methodological debate.

⁰²The first is private sales. Dealer and private transactions represent a substantial share of market value and are not published, so an index built on auction alone is describing the part of the market that reports rather than the market.

⁰³The second is failure. Where unsold lots are excluded, the series records only works that found a buyer, which systematically removes evidence of weak demand. Whether bought-in lots are counted is one of the most consequential and least discussed choices in index construction.

⁰¹For direction across a broad category over a long period, they are informative. Whether interest in a segment has broadened or narrowed, whether a category has recovered, whether demand has shifted between media — these are questions an index can help answer.

⁰²They are also useful as a check on narrative. Where market commentary describes a boom and the underlying series shows a flat line with two exceptional lots, the index has done its job.

⁰¹Ask four questions before quoting a figure: what transactions are included, are unsold lots counted, what method was used, and who produced it and why.

⁰²Then apply the finding at the level it supports. An index can inform a view about a category. It cannot tell you what the work in front of you is worth — that still requires specific comparables, chosen deliberately, with the reasons for each written down.