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The Art of Emerging Markets: The Art of Emerging Markets: A Latin American Perspective A Latin American Perspective By By Sebastian Edwards Sebastian Edwards University of California, Los Angeles University of California, Los Angeles and and NBER NBER October, 2003 October, 2003

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Page 1: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

The Art of Emerging Markets:The Art of Emerging Markets:A Latin American PerspectiveA Latin American Perspective

ByBySebastian EdwardsSebastian Edwards

University of California, Los AngelesUniversity of California, Los Angelesandand

NBERNBEROctober, 2003October, 2003

Page 2: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Rivera and Rivera and KhaloKhalo......

Page 3: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

……Botero Botero and Lam...and Lam...

Page 4: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

......MattaMatta and and TamayoTamayo......

Page 5: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

This talk is on the economics of LatinThis talk is on the economics of LatinAmerican artAmerican artI use economic tools to try to understand theI use economic tools to try to understand theartistic creative process and art as anartistic creative process and art as aninvestmentinvestmentThis research is part of the new and growingThis research is part of the new and growingfield of the field of the economics of arteconomics of art or or culturalculturaleconomicseconomicsSome authors:Some authors:–– Will Will BaumolBaumol, Richard Caves, Sherwin Rosen,, Richard Caves, Sherwin Rosen,

Bruno Bruno FreyFrey, and David , and David GalensonGalenson

Page 6: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Some issues on the economics ofSome issues on the economics ofLatin American artLatin American art

Patters of creativityPatters of creativity–– Do Latin American artists follow similar patternsDo Latin American artists follow similar patterns

than European and U.S. artists?than European and U.S. artists?–– “Conceptual” and “experimental” artists“Conceptual” and “experimental” artists–– ““Tradidional Tradidional or or indigenistsindigenists” and “” and “universalistuniversalist” artists” artists

Latin American art as an investmentLatin American art as an investment–– Alternative portfoliosAlternative portfolios–– Investment rulesInvestment rules

The role of foreign training, travel and exile onThe role of foreign training, travel and exile oncreativity and valuecreativity and value

Page 7: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

The data setThe data setData on auctionsData on auctions–– 13,000 observations on auctions13,000 observations on auctions–– 115 artists from 17 countries for 1977-2001115 artists from 17 countries for 1977-2001–– Paintings and drawingsPaintings and drawings–– Prices, date auctioned, date painted, medium, size,Prices, date auctioned, date painted, medium, size,

signed, who sold it, and other characteristicssigned, who sold it, and other characteristics–– Number of pieces auctioned per artist:Number of pieces auctioned per artist:

average = 260; median = 177; minimum = 35.average = 260; median = 177; minimum = 35.

Data on artists lifeData on artists life–– BiographiesBiographies–– Art publicationsArt publications

Page 8: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Artists with largest number of pieces:Artists with largest number of pieces:–– FernandoFernando Botero Botero,,–– Leonor FiniLeonor Fini,,–– WifredoWifredo Lam, Lam,–– RobertoRoberto Matta Matta,,–– CarlosCarlos Merida Merida,,–– ReneRene Portocarrero Portocarrero,,–– Diego Rivera,Diego Rivera,–– Rufino TamayoRufino Tamayo,,–– Francisco Toledo,Francisco Toledo,–– JoaquinJoaquin Torres-Garcia, Torres-Garcia,–– Francisco Francisco ZunigaZuniga..

Page 9: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Artists with pieces that have been sold inArtists with pieces that have been sold inexcess of USD 1 million (in 1995 dollars):excess of USD 1 million (in 1995 dollars):–– Tarsila Tarsila do do AmaralAmaral–– Fernando Fernando BoteroBotero,,–– Frida KhaloFrida Khalo–– WifredoWifredo Lam, Lam,–– Roberto Roberto MattaMatta,,–– Diego Rivera,Diego Rivera,–– Rufino TamayoRufino Tamayo,,–– Jose Maria Jose Maria VelascoVelasco

Page 10: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

I. Patterns of CreativityI. Patterns of CreativityDo patterns of creativity follow “northern”Do patterns of creativity follow “northern”artists’ patterns, or do they have own dynamics?artists’ patterns, or do they have own dynamics?David David GalensonGalenson, , Painting Outside the LinesPainting Outside the Lines(Harvard University Press, 2001)(Harvard University Press, 2001)–– Uses auction data to analyze when artists did theirUses auction data to analyze when artists did their

best workbest work–– Defines two patterns:Defines two patterns:

»» “Conceptual”: Best work is done early on, at a young age“Conceptual”: Best work is done early on, at a young age»» “Experimental”: Best work done at older age“Experimental”: Best work done at older age

–– Finds that artists born before 1930 tend to beFinds that artists born before 1930 tend to be““experimentalexperimental;” those born after 1930 tend to be;” those born after 1930 tend to be““conceptualconceptual””

Page 11: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

MethodologyMethodologyEstimate, for different groups weighted-fixed-Estimate, for different groups weighted-fixed-effect regressions of the following type:effect regressions of the following type:

ln ln PricePrice jtjt = = αα1 1 age + age + αα2 2 age age 22+ + αα3 3 ageage33+ + αα44ageage44

+ + αα55 lnln height + height + αα66 lnln width + width + αα7 7 paperpaper+ + αα8 8 signed + signed + ΣΣ ββi i year of sale dummyyear of sale dummy+ + ΣΣ γγi i artist dummyartist dummy+ + ΣΣ ss ii decade dummy + decade dummy + εε jtjt

The coefficients of The coefficients of ageage, , ageage22, , ageage33, , andand ageage44

determine the “pattern of creativity”determine the “pattern of creativity”The patterns are compared statistically for theThe patterns are compared statistically for thedifferent groupsdifferent groups

Page 12: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Creative pattern equations were estimated forCreative pattern equations were estimated forthe following different groups:the following different groups:–– “Early” (pre 1900 birth date), “intermediate” (1900-“Early” (pre 1900 birth date), “intermediate” (1900-

1920 birth date) and “younger” (post 1920 birth1920 birth date) and “younger” (post 1920 birthdate)date)

–– By different schools: “Traditional” or “By different schools: “Traditional” or “indigenistsindigenists””vsvs. “. “universalistsuniversalists””

–– Artists with formal training abroad Artists with formal training abroad vsvs. artists without. artists withouttraining abroadtraining abroad

Weighted regressions are used, with the totalWeighted regressions are used, with the totalnumbers of pieces auctioned by each artist asnumbers of pieces auctioned by each artist asweight.weight.

Page 13: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Individual patterns ofIndividual patterns ofcreativity for the “big six”creativity for the “big six”

Page 14: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

river

a

age_paint20 70

4.8071

6.2646

Riverata

may

o

age_paint21 91

7.75363

8.59091

Tamayo

lam

age_paint20 79

-1881.11

-1879.13

Lamkh

alo

age_paint20 47

6.80272

9.44632

Khalo

mat

ta

age_paint25 86

4.6901

8.82037

Matta

bote

ro

age_paint18 65

6.4133

8.68726

Botero

Page 15: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Summary of Results on CreativitySummary of Results on CreativityIn contrast to In contrast to GalensonGalenson, , we don’t seewe don’t see a decline in a decline inthe age at which artists do their best workthe age at which artists do their best workOn the contrary, the On the contrary, the age when best work is doneage when best work is donehas increased for younger generationshas increased for younger generations of artists of artistsWe do see that patters of creativity differ forWe do see that patters of creativity differ fordifferent artistic schools: different artistic schools: “traditionalists”“traditionalists” peak peakearlier than earlier than ““universalistsuniversalists””We do see that “foreign training” does affectWe do see that “foreign training” does affectpatterns of creativity: those trained abroad have apatterns of creativity: those trained abroad have asteep increase in prices.steep increase in prices.

Page 16: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Results of Patterns of CreativityResults of Patterns of Creativityby Age of Birthby Age of Birth

Page 17: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Creative pattern for Creative pattern for pre-1900pre-1900 artists artistsea

rly_i

ndex

age_paint23 94

3.26931

4.54009

Max=23 years old

Page 18: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Creative pattern for Creative pattern for 1900-19201900-1920 artists artists

Max=31 years

inte

r_in

dex

age_paint18 86

-.352999

2.92035

Max=31 years old

Page 19: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Creative pattern for Creative pattern for post-1920post-1920 artists artistsyo

ung_

inde

x

age_paint18 73

1.5318

3.89899

Max=66 years old

Page 20: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Results of Creativity andResults of Creativity andForeign TrainingForeign Training

Page 21: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

tra_i

ndex

age_paint18 89

3.47119

4.48754

notra

_ind

ex

age_paint18 91

3.1034

4.69633

Training abroad

All ArtistsAll Artists

No training abroad

Max= 37 years old

Max= 23 years old

Page 22: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Artists bornArtists bornafter 1925after 1925

No training abroad

Max= 37 years old

Youn

g_no

tra_i

ndex

age_paint18 71

4.82975

6.66129

Max= 61 years old

No training abroad

Youn

g_tra

_ind

ex

age_paint18 65

2.05644

4.48485

Training abroad

Max= 65 years old

Page 23: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Creativity patterns forCreativity patterns for“traditionalists”“traditionalists” and and ““universalistsuniversalists””

Page 24: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

An artistic controversyAn artistic controversyFor many years Latin American artists believedFor many years Latin American artists believedthat their work should reflect the region’s that their work should reflect the region’s realityreality..The Mexican muralists --The Mexican muralists --RiveraRivera, , SiqueirosSiqueiros,,OrozcoOrozco--are the best known “traditionalists”--are the best known “traditionalists”Brazil’s Brazil’s ““antropofagiaantropofagia”” school of school of Tarsila Tarsila dodoAmaralAmaral is another manifestation of this viewis another manifestation of this viewFernandoFernando BoteroBotero, is a modern representative of, is a modern representative ofthis view, with his works on typical families,this view, with his works on typical families,bullfights, and “banana republic” dictatorsbullfights, and “banana republic” dictators

Page 25: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Other representatives of this “traditional”Other representatives of this “traditional”view include Franciscoview include Francisco Zuniga Zuniga, Ana, AnaMercedesMercedes Hoyos Hoyos, Armando, Armando Morales Morales and andothersothersThese artists have in common the use of aThese artists have in common the use of adistinctive Latin American “imagery”distinctive Latin American “imagery”

Page 26: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and
Page 27: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

This approach was rejected early on by someThis approach was rejected early on by someindividual artists. The most important one wasindividual artists. The most important one wasRobertoRoberto Matta Matta, who did not really consider, who did not really considerhimself, a Latin American artisthimself, a Latin American artistWifredoWifredo Lam -- whose work evokes African Lam -- whose work evokes Africanmasks -- is another artist that rejected themasks -- is another artist that rejected the“traditional” Latin American art“traditional” Latin American artOthers include Others include Jose LuisJose Luis Cuevas Cuevas, , RufinoRufinoTamayoTamayo, , Fernando de Fernando de SzyszloSzyszlo; all of them called; all of them calledfor a “universal” art, and rejected the strict Latinfor a “universal” art, and rejected the strict LatinAmerican imageryAmerican imagery

Page 28: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and
Page 29: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

trad_

inde

x

age_paint24 94

.401458

2.51689

univ

er_i

ndex

age_paint24 91

3.6407

4.99211

Traditionalists

Universalists

Max=plateau from 23 to 62 years of age

Max=34 yo

Page 30: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

II. Latin American ArtII. Latin American Artas an Investmentas an Investment

Page 31: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Two approachesTwo approachesRepeated sales: Repeated sales: In order to compare worksIn order to compare workswith exactly the same characteristics, thiswith exactly the same characteristics, thisapproach looks only at repeated sales of theapproach looks only at repeated sales of thesame work through timesame work through timeHedonic prices: Hedonic prices: The “properties” of theThe “properties” of theprototypical work are maintained “constant”prototypical work are maintained “constant”using regression analysis. Time-specificusing regression analysis. Time-specificdummies are then used to construct andummies are then used to construct an“hedonic price index”“hedonic price index”

Page 32: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Some examples of repeated salesSome examples of repeated salesMattaMatta, , “The Disasters of Mysticism,”“The Disasters of Mysticism,” (1942) (1942)–– 1983: $ 160,0001983: $ 160,000–– 1990: $ 1,155,0001990: $ 1,155,000–– 1999: $ 2,400,0001999: $ 2,400,000

Lam, Lam, “La “La mananamanana verdeverde,”,” (1943) (1943)–– 1987: $ 380,0001987: $ 380,000–– 1990: $ 550,0001990: $ 550,000–– 1994: $ 870,0001994: $ 870,000

GerszoGerszo, , ““RojoRojo, , azulazul y y amarilloamarillo,”,” (1966) (1966)–– 1985: $ 12,0001985: $ 12,000–– 1992: $ 38,0001992: $ 38,000

Page 33: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Results from hedonic priceResults from hedonic priceestimationsestimations

Page 34: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Hedonic PriceHedonic PriceIndexes forIndexes for

Selected PortfoliosSelected Portfolios

year

big5 universalists traditionalists

1980 2000

.71055

3.69777

year

big5 women_nofk mexican_women_nofk

1980 2000

.16888

3.69777

year

small114 no_for_tra foreign_training

1980 2000

.687523

3.99971

Page 35: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Hedonic PriceHedonic PriceIndexes forIndexes for

Selected CountrySelected CountryPortfoliosPortfolios

year

argentina brazil chile

1980 2000

.384193

8.12645

year

colombia cuba ecuador

1980 2000

.629221

7.17479

year

mexico peru uruguay

1980 2000

.534963

3.05738

Page 36: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Return for overall portfolioReturn for overall portfolio(Real US Dollars)(Real US Dollars)

-.074822

.38741 portfolio

19811982

19831984

19851986

19871988

19891990

19911992

19931994

19951996

19971998

19992000

Mean= 0.0900StDev=0.1260

Page 37: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Risk and ReturnRisk and Return(National Portfolios, Real USD 1980-2000)(National Portfolios, Real USD 1980-2000)

mea

n80

stdev80.126036 .694922

.035075

.225461

Argentin

Brazil

Chile

Colombia

Cuba

Ecuador

GuatemalHaiti

Mexico

PeruRest

Total

Uruguay

Venezuel

Page 38: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Risk and ReturnRisk and Return(National Portfolios, Real USD 1985-2000)(National Portfolios, Real USD 1985-2000)

mea

n85

stdev85.128713 .623116

.053143

.230239

Argentin

Brazil

Chile

ColombiaCuba

Ecuado

Guatemal

HaitiMexico

Peru

Rest

Total

Uruguay

Venezuel

Page 39: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Risk and Return of AlternativeRisk and Return of AlternativePortfolios: 1980-2000 & 1985-2000Portfolios: 1980-2000 & 1985-2000

portfolio mean80 stdev80 mean85 stdev85Traditionalists 0.058262 0.219014 0.081053 0.213996Universalists 0.039561 0.19092 0.058371 0.193431Old 0.03899 0.207098 0.056611 0.200067Young 0.055367 0.18261 0.073505 0.187737Intermediate 0.041235 0.214441 0.064352 0.201476Training 0.052471 0.205294 0.072575 0.210456NoTraining 0.049053 0.216564 0.061776 0.212836ManyPieces 0.043358 0.179329 0.059973 0.182317Big5 0.062479 0.254084 0.068919 0.228527Small 0.060238 0.3277 0.094032 0.328954Women 0.265447 1.100482 0.2182 0.464957WnoFrida 0.320473 1.400005 0.23236 0.501046WnoFT 0.324347 1.417048 0.233664 0.503269MexWnoF 0.626591 2.681618 0.355209 0.784392

Page 40: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and

Risk and Return of AlternativeRisk and Return of AlternativePortfolios: 1980-2000 & 1985-2000Portfolios: 1980-2000 & 1985-2000

portfolio mean80 stdev80 mean85 stdev85Traditionalists 0.058262 0.219014 0.081053 0.213996Universalists 0.039561 0.19092 0.058371 0.193431Old 0.03899 0.207098 0.056611 0.200067Young 0.055367 0.18261 0.073505 0.187737Intermediate 0.041235 0.214441 0.064352 0.201476Training 0.052471 0.205294 0.072575 0.210456NoTraining 0.049053 0.216564 0.061776 0.212836ManyPieces 0.043358 0.179329 0.059973 0.182317Big5 0.062479 0.254084 0.068919 0.228527Small 0.060238 0.3277 0.094032 0.328954Women 0.265447 1.100482 0.2182 0.464957WnoFrida 0.320473 1.400005 0.23236 0.501046WnoFT 0.324347 1.417048 0.233664 0.503269MexWnoF 0.626591 2.681618 0.355209 0.784392

Page 41: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and
Page 42: The Art of Emerging Markets: A Latin American Perspective · The Art of Emerging Markets: A Latin American Perspective By Sebastian Edwards University of California, Los Angeles and