An examination of the impact of COVID-19 on the financial markets and how this directs investment into the market for fine art

Journal of Economic and Financial Sciences


 
 
Field Value
 
Title An examination of the impact of COVID-19 on the financial markets and how this directs investment into the market for fine art
 
Creator Baur, Peter W.
 
Subject COVID-19; Dax; Dow Jones; FTSE/JSE; Nikkei; London Stock Exchange; fine art; financial markets; Global Art Price Index
Description Orientation: The global financial markets have been severely affected by the influence of the Coronavirus Disease 2019 (COVID-19). Across the board, most of the financial markets have experienced a very sharp decrease in trade as a consequence of this pandemic. Investors sometimes choose to include such assets in order to diversify portfolios and also at the same time distribute risk away from the usual financial markets. As the global economy begun to falter under the influence of COVID-19, the value of holding fine art as an alternative investment increased.Research purpose: This article examines the implications of the impact of COVID-19 on the financial markets and the global art markets. This article explores the real impact of COVID-19 on the respective stock markets and then compared it against the global art price index, both in European euro and American dollar.Motivation for the study: The impact of COVID-19 will have numerous spill over effects into other sectors of the economy, one such sector being the market for fine art. Fine art as an investment item has many desirable qualities to an investor and can act as an alternative investment asset because of its ability to hold value.Research approach/design and method: Five financial markets are analysed in this study, namely the German DAX, the American Dow Jones, the Japanese Nikkei and the London Stock Exchange and the Johannesburg Stock Exchange (JSE), Financial Times Stock Exchange (FTSE), by using a combination of market simulations and forecast techniques, including Auto-Regressive Integrated Moving Average (ARIMA), Generalized Auto-Regressive Conditional Heteroskedasticity (GARCH), Monte Carlo simulation and Minimum Mean Square Error (MMSE) techniques. The real impact of COVID-19 is assessed on the respective stock markets and then compared against the global art price index, both in European euro and American dollar.Main findings: The findings show that there is a significant positive influence on holding fine art as an alternative investment, especially as the levels of market risk increase because of COVID-19.Practical/managerial implications: The impact of an economic or social crisis has led to a diversification of trade in investments. Similar to currency portfolios been diverted into gold trade to mitigate risk due to political or social unrest, equity trading has mitigated some risk into alternative forms of investment.Contribution/value-add: This article highlights the nature of portfolio diversification into fine art as an alternative investment, brought about due to extreme market conditions.
 
Publisher AOSIS
 
Contributor
Date 2020-10-28
 
Type info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion —
Format text/html application/epub+zip text/xml application/pdf
Identifier 10.4102/jef.v13i1.574
 
Source Journal of Economic and Financial Sciences; Vol 13, No 1 (2020); 22 pages 2312-2803 1995-7076
 
Language eng
 
Relation https://jefjournal.org.za/index.php/jef/article/view/574/1077 https://jefjournal.org.za/index.php/jef/article/view/574/1076 https://jefjournal.org.za/index.php/jef/article/view/574/1078 https://jefjournal.org.za/index.php/jef/article/view/574/1075
 
Rights Copyright (c) 2020 Peter W. Baur https://creativecommons.org/licenses/by/4.0