Volatility of Price Indices for Heterogeneous Goods with Applications to the Fine Art Market
Price indices for heterogeneous goods such as real estate or fine art constitute crucial information for institutional or private investors considering alternative investment decisions in times of financial markets turmoil. Classical mean-variance analysis of alternative investments has been hampered by the lack of a systematic treatment of volatility in these markets. In this paper we propose a hedonic regression framework which explicitly defines an underlying stochastic…