Fig 1 shows a 25-year history of the average price of photographs sold at auction vs. the S&P 500.
The S&P 500 equals the total market value of the common stock of 500 publicly traded companies. Shares in an S&P 500 index fund purchased in 1981 for $1280 (equal to the average price of a photograph in 1981) would be worth precisely $11,622 in 2005. This corresponds to an annual growth rate of 9.6%.
The photography measurement equals the hammer + premium of all single auction lots (i.e., it excludes multiple lots and buy-ins) divided by the number of single auction lots. The exponential equation describes a curve that fits the data extremely well (explaining 97% of the variation) and gives an 11.4% estimate of the annual price growth.
So, does this mean that photographs were a better 25-year investment than stocks?
Whoa cowboy. Better circle the wagons.
Stocks and Art Are Different
Here are some differences between stocks and art:
Any of these differences is enough to give a money manager pause about “investing” in art.
But for those who had to have it and bought before doing the math, where do things stand? Is it appreciating? Any cause for concern? What are the issues?
The Mix Issue
The mix is the number and type of individual elements in a set.
In the S&P 500, the mix is always the same 500 companies. Over time each contributes relatively more or less to the total market value, depending on the company’s relative growth rate. The set elements are simple and identical.
In the photography auction market, the mix changes from year to year. Overall, it is comprised of thousands of photographers with scores of titles and prints with all kinds of characteristics that affect value. The elements are complex and unique. Some of the most important elements cannot even be quantified (e.g., fineness and condition).
In any given year, what is presented at auction is a small subset of the total. When the yearly average goes up, as it has done most years, it is unclear offhand whether this represents higher prices or better art.
The Photography Mix Has Changed
There were significant trends in the photography auction market from the early 1980s to 2005 that can be seen as drastic changes in mix.
In the early 1980s and also in 2005, the top 5 photographers (ranked by total sales at auction) accounted for approximately 25% of the total market.
In the early 80s, the top five photographers were:
1) Edward Weston
2) Ansel Adams
3) Alfred Stieglitz
4) Eugene Atget
5) Paul Outerbridge
In 2005, they were:
1) Diane Arbus
2) Irving Penn
3) Robert Mapplethorpe
4) Andreas Gursky
5) Man Ray
Some other key trends between 1980 and 2005 were:
- Large prints (24 x 30 inch and larger) rose from 2% to over 30% of the market
- Color photos went from less than 1% to more than 20% of the market
- Albumen photographs declined from 10% to 2%
- German photographers were on the ascendant
- French photographers were on the descendant (except for a large spike in 1999 when rare photographs by Charles Negre came to market)
How does it make sense to compare yearly averages of photography prices when the photos from year to year are so different?
To be continued…
