The Impact Of Fake Discovery On The Art Price And Sales Channel

The role of art is changing.Art is no longer just appreciated for its aesthetic value and the expression of its lofty ideals but as an investment.The sale of fakes and forgeries has been a worldwide problem,with substantial loss suffered each year.Accor-ding to Thompson(2008),40 percent of the high end art market consists of forgeries.Fake investigation is costly and may take years.Moreover,the discovery of fakes/forgeries has a negative impact on the art market since it will undermine buyers'confidence in the market and make them wary of purchasing art in the futureMost of the existing literature studies the impact from a qualitative perspective A generally accepted opinion is forgery discovery will undermine the art market Quantitative studies are limited.Bocart and Oosterlinck(2011)conduct a quantitative research using hedonic regressions,but their study period is confined to one year before and after the fake discovery date.Thus,the impact of the fake discovery might not be fully captured.This paper constitutes the discussion from two perspectives:the art price and the sale channel.The paper applies hedonic regressions and studies the impact over the time period 2 years before the fake discovery date and 5 years after the case.The whole dataset consists of 18 different fake discovery dates,involving 41 forged artist of whose 12,417 artworks have been forgedBased on the hedonic regression results,I conclude that the price on average decreases during[-24,24],with the largest drop several years around 1977 and 1993;the market is sensitive to the fake discovery since the price declines directly in the fake discovcry month;sellers are willing to put off their sales up to about 6 month after the fake discovey;the market is viewed as purged about 1 year after the discovery.Generally,sellers are more willing to sell their artworks via less famous auction houses after the fake has been made public.Around 1977 especially,works were usually auctioned off via minor auction houses.