NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Julien Pénasse

University of Luxembourg
Faculty of Law, Economics and Finance
6, rue Richard Coudenhove-Kalergi
Luxembourg

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Luxembourg School of Finance

NBER Working Papers and Publications

March 2020When a Master Dies: Speculation and Asset Float
with Luc Renneboog, José A. Scheinkman: w26831
The death of an artist constitutes a negative supply shock to his future production; in finance terms, this supply shock reduces the artist's float. Intuition may thus suggest that this supply shock reduces the future auction volume of the artist. However, if collectors have fluctuating heterogeneous beliefs, since they cannot sell short, prices overweigh optimists' beliefs and have a speculative component. If collectors have limited capacity to bear risk, an increase in float may decrease subsequent turnover and prices (Hong et al. 2006). Symmetrically, a negative supply shock leads to an augmentation of prices and turnover. We find strong support for this prediction in the data on art auctions that we examine.
 
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