Abstract: Cultural heritage and accumulation bestow China’s art market and art financialization with a unique development history and research value. Based on the micro data of China’s painting and calligraphy auction market from 2000 to 2017, this paper constructs a price index of diversity using the repeated sales method, and also tests the problem with the law of one price in China’s art market based on the differences between auction houses and districts. The study finds that: (1) The annualized return of China’s art market is as high as 7.96% while the price index is highly volatile, with high returns accompanied by high risks; (2) China’s art market does not satisfy the law of one price, and the auction house effect and location effect are significant; (3) Speculative arbitrageurs in the market are mostly short-term investors who focus more on Ming and Qing dynasties and contemporary works, low-priced works and non-masterpieces; (4) During a crisis the market follows the law of one price, and the safe-haven properties of artwork come to the fore. This study is important for regulating investment behavior in the art market, enriching asset allocation options, and enhancing China’ s cultural soft power.

Key words: art investment, law of one price, repeat sales method