Art as an investment: Risk, return and portfolio diversification in major painting markets

Worthington, Andrew C. & Higgs, Helen (2004) Art as an investment: Risk, return and portfolio diversification in major painting markets. Accounting and Finance, 44(2), pp. 257-272.

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This paper examines risk, return and the prospects for portfolio diversification among major painting and financial markets over the period 1976-2001. The art markets examined are Contemporary Masters, French Impressionists, Modern European, 19th Century European, Old Masters, Surrealists, 20th Century English and Modern US paintings. The financial markets comprise US Treasury bills, corporate and government bonds and small and large company stocks. In common with the literature in this area, the study finds that the returns on paintings are much lower and the risks much higher than conventional investment markets. Moreover, while low correlations of returns suggest that opportunities for portfolio diversification in art works alone and in conjunction with equity markets exist, the construction of Markowitz mean-variance efficient portfolios indicates that no diversification gains are provided by art in financial asset portfolios. However, diversification benefits in portfolios comprised solely of art works are possible, with Contemporary Masters, 19th Century European, Old Masters and 20th Century English paintings dominating the efficient frontier during the period in question.

Impact and interest:

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ID Code: 2323
Item Type: Journal Article
Refereed: Yes
Keywords: Art and collectibles, Risk and return, Markowitz efficient frontier, Portfolio diversification
DOI: 10.1111/j.1467-629X.2004.00108.x
ISSN: 1467-629X
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BANKING FINANCE AND INVESTMENT (150200) > Banking Finance and Investment not elsewhere classified (150299)
Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > ECONOMETRICS (140300) > Panel Data Analysis (140304)
Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > Applied Economics not elsewhere classified (140299)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2004 Blackwell Publishing
Copyright Statement: The definitive version is available at
Deposited On: 31 Oct 2005 00:00
Last Modified: 05 Jan 2011 13:25

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