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Roman Kräussl publishes Art-Finance research in Management Science

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Published on Wednesday, 25 March 2020

Dr. Roman Kräussl, Professor of Finance at the University of Luxembourg and Visiting Fellow at the Hoover Institution at Stanford University, has co-authored a paper with Amy Whitaker, Assistant Professor of Visual Arts Administration at New York University.

The article, which will appear later this year in Management Science is entitled "Fractional Equity, and the Future of Creative Work." This paper represents the first empirical study of fractional equity in art, pioneering a new method of art market analysis by using primary market records. 

Aiming to address the structural mispricing of early-stage creative work whose value is only known over time, the researchers investigated specifically what would happen if artists "retained fractional equity' in their work when it is first sold. Kräussl and Whitaker found that if artists had retained equity in their work after the first sale, they would have substantially outperformed equity markets. In some cases, artists would have outperformed the S&P 500 by 1,000 times, with 20-40% returns every year from 1960 to 2016. 

The researchers therefore propose a system of fractional equity in art which functions as a property right and thus can be traded at any time. This system could create market-driven patronage for artists and systems of diversification for art collectors, using blockchain as the infrastructure of a marketplace in these shares. As Kräussl and Whitaker explain in their paper, "The retained equity approach structurally allows artists and other early risk takers to use the economic nature of property rights to own shares that include them in potential upside."