Friday, May 12, 2017

"ARTSTAQ Wants to Transform the Art Market into a Stock Market"

There are a couple big hurdles to this stuff:
1) The intersection of the physical and the electronic has shown itself to be a tough nut in multiple industries.
2) As noted below, quantifying the qualitative is too reminiscent of mark-to-myth CDO's to be comfortable.
That said, these folks are trying.

From ArtNEWS:
Launched in 2015, ARTSTAQ bills itself as a sort of NASDAQ stock exchange for art. By applying the principle of a standardized index measure to artists and their work, the London- and Prague-based startup offers an online marketplace that aims to “provide completely transparent data for buyers and sellers” by quantifying the opacity of art valuation and in the process open the field to a wider investor base. In no uncertain terms, ARTSTAQ wants to turn art into an asset class.
Essential to the enterprise is an algorithm-based rating system. Developed over three years by company founder Roman Komárek, a former NASDAQ trader and art collector, the algorithm considers existing data, such as auction history, as well as more qualitative inputs provided by a group of around 50 curators, gallerists, and academics from around the world. The result is a Standard & Poor’s-like rating given to each artist in the ARTSTAQ database.

On April 15, an index of around 300,000 artists was made available along with the launch of the company’s real-time trading exchange. For now, the focus is on emerging artists. In time, said ARTSTAQ’s head of communications Petr Václavek, the company would like to move into the market for more established artists too.

In an interview, Václavek told ARTnews about the origins of the company and its models for working thus far.

ARTnews: How did the idea for ARTSTAQ come about?
Petr Václavek: Roman Komárek wondered why no one had taken capital market principles and applied them to the art market. When you deal on the NASDAQ, everything has to be regulated and the rules have to be set, which you need to follow or else risk fraud. On the art market, it’s totally unregulated, which is why the jungle looks the way it does.  So Komárek decided to try financialize a field that his predecessors had considered too “sacred” to interfere with. In 2015 we began testing the system in Central and Eastern Europe and Latin America, allowing people to buy paintings from the site, leave them in deposits, and then sell them again like stocks. For the last few months we have been working on indexation.

ARTnews: How have you gone about measuring the value of artists and their work?
Václavek: All the current art market models and start-ups deal with existing big data information, which only takes into consideration auction results. The informational source that we will be offering takes into consideration more economic data from both the investment and art world, such as upcoming exhibitions and critical reception as well as up-to-date market information. The algorithm then takes all this information and produces a simple number that we’re calling the Art Quotient, which is the overall expression of quality and future growth and integrity of the artist. Think of it like an IMDB rating from 0 to 10. The higher the number, the less the risk you take with your investment.

ARTnews: How do you translate qualitative information into data?
Václavek: The art market is data translated into feelings and vice versa...