News-Antique.com - Dec 20,2008 - A tracking report on the year-to-date value of the Mei Moses All Art Index has been issued by Beautiful Asset Advisors. According to the fall art market insight report, as of 10/31/2008, the value of the index was 270.58** which, as one would expect, is down on the 2007 year end value of the index which was 279.42. Although the value of the index is published annually, according to the people at Beautiful Asset Advisors® LLC who calculate the index “We are now getting sufficient incremental data during a year so that at periodic intervals we can recreate our index with the sales that have transpired during the year up to that date. If we assume that these periodic sales have taken place at the end of the year than the index numbers we would get would be the ones that would be achieved at the end of the year if no additional information was collected. We have employed this technique to generate the summer and fall tracking results.
For those of you who haven’t heard of the Mei Moses Index before it is basically a number that represents the rate of return of fine art for a particular year. The rate of return can basically be defined as the annual percentage return realized on an investment. If you haven’t heard of the Mei Moses Index before or have heard of the index but wondered how it is calculated then read on. The Mei Moses index is calculated using data collected from repeat sales of the same work of art which is then used to determine the annual return of that particular work of art. For example, if a painting was purchased in 1990 for $50,000 and then sold in 2000 for $150,000 the total return would be 200% over a 10 year period which could then be broken down to 20% per year. The problem with using the average increase in value per year calculated from the total increase in value according to the two sale points is that the assumption is being made that the work of art increased (or decreased) in value by the same percentage each year which would not be the case. To combat this problem the Mei Moses index uses a special formula to determine as accurately as possible the yearly increase (or decrease) in value.
A simplified example of how the index is calculated is given by Matthew Spiegel who is a finance professor at Yale university. Spiegel’s example is:
Painting C sells in years 1 and 3 and during that time returns 5% per year (10% total for two years). Painting D sells in years 2 and 3 and returns 3% (3% total for one year). The repeat sales index would start by estimating the return from years 2 to 3 at 3% in order to perfectly fit the return on painting D. Given this it would then estimate the return to art from years 1 to 2 at 7% (3%+7% equals