Gaming the expected returns for living artists can be a fool’s errand
The Whitney’s curatorial committee presented living artists who defined contemporary art in 1973. Our analysis reveals that the overall financial return, even on the eve of an unprecedented 40-year bull run in the segment, significantly lags the S&P 500. Still, our case study reveals that considerations such as exhibition history can help boost returns.¹
The 221 American artists included in the 1973 Biennial comprise two groups:
Group 1 included contemporary artists with an exhibition history and strong gallery representation, such as Jasper Johns, Robert Rauschenberg,
, Cy Twombly,
, and Alex Katz.
Group 2 were the less established emerging artists, those without a museum exhibition history, such as Alice Adams,
, Paula Barr, Joel Bass,
, and many others I had never heard of.
For comparison, the S&P 500 annualized return from January 1973 to September 2017 was 7.1% per year, 10.2% annually with dividends reinvested (source S&P.com). The total return of the S&P 500 from the eve of the 1973 Whitney Biennial to September 2017 was 2,000%, or over 7,500% if you reinvested your dividends.²
So how would a hypothetical art investor have fared buying at the Biennial? Returns of Group 1 artists—despite the blockbuster names—are modestly positive with a few fireworks. ’s Still Life with Net, Shell, Rope, and Pulley
could have been bought in 1973 for $15,000, and would likely bring more than $7 million today at auction.³ The most lucrative buy would have been Cy Twombly’s Untitled
oil and crayon chalkboard painting, offered via Leo Castelli for around $8,000. Works from this series are now status symbols and can bring upwards of $30 million at auction, an astronomical 21% annual return over 43 years.⁴
Still, even in 1973, bargains were hard to come by. Exhibition history was already priced into Group 1 works. A fresh Johns or Rauschenberg in 1973 cost at least $25,000, a hefty premium over less established artists. High expectations were priced into these artists. A few artists, like 1960s market-darling
, cost as much back in 1973 as he does today. Therefore, if we estimate that Group 1 works of art cost an average price of $10,000 in 1973, we would need each painting to appraise today for at least $750,000 to keep pace with the total return of U.S. equities.⁵ With the likes of Judd, Johns, Katz, Frankenthaler, Kelly, Stella, and Noland in the 1973 Biennial, that outcome is not unreasonable, but not guaranteed.
If we took the riskier path and bought Group 2 artists without an exhibition history, our returns would not only trail the S&P 500, but would likely be negative. Most Group 2 Biennial artists barely have an active market to speak of today. We might have gotten lucky by purchasing an early Barbara Kruger or
, but many of 1973’s future stars, such as Alice Adams, Terry Allen, Paula Barr, Joel Bass, Jake Berthot,
, Arthur Cohen, Joyce Cote, William Geis, or Ernest Frazier, returned close to a total loss despite their early curatorial esteem.
Bottom line: The tepid financial returns of an expertly curated, culturally significant exhibition of post-war icons, on the eve of the art market’s global expansion, should be a warning to the financially driven collector. If you must buy art purely as an investment, pay attention to an artist’s exhibition history. The returns of 1973 Biennial artists with an established exhibition history exceed their early-career emerging peers by several orders of magnitude.⁶