From Blue-Chip to Main Street: Segmentation and Economic Resilience in the U.S. Art Market

Abstract

This study examines how segmentation within the art market shapes responses to economic and financial conditions and policy changes across price tiers. Using variations of hedonic regression and event study models, I test three hypotheses: whether mid-market segments exhibit greater volume resilience but lower price volatility during downturns, whether the Tax Cuts and Jobs Act (TCJA) increased volatility and reduced sales in the ultra-high end of the market, and whether art market behavior mirrors equity market investor composition and performance-chasing patterns. Analysis reveals that sales volume is more stable in the lower-priced market segments and unresponsive to macroeconomic changes. Price volatility, by contrast, responds strongly to macroeconomic conditions. The TCJA does not increase volatility as expected; instead, it is associated with a delayed decline in observed volatility in the ultra-high segment. Finally, market composition is important in predicting volatility and performance-chasing behavior. Overall, this thesis shows that art markets are segmented, composition-sensitive, and responsive to both macroeconomic and policy shocks in ways that differ across tiers. These findings contribute to the literature on art as an asset class by demonstrating that price discovery, liquidity, and volatility operate through distinct mechanisms across the market structure.