Revisiting Baumol's Art as floating crap game

Abstract

We show that Baumol's conclusion that returns on bonds are higher than returns on paintings is too pessimistic. There are segments in the market for which returns are significantly higher than returns on bonds and stocks, during long periods of time (20 to 40 years); since tastes do change slowly (though not in a predictable way), this may imply that beating the market is not impossible. We also construct price indexes for paintings over the last 200 years.