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Risk, return and portfolio diversification in major painting markets: The application of conventional financial analysis to unconventional investments: Discussion paper No 148

Worthington, Andrew C. & Higgs, Helen (2003) Risk, return and portfolio diversification in major painting markets: The application of conventional financial analysis to unconventional investments: Discussion paper No 148. . [Working Paper] (Unpublished)

Abstract

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 nvestment 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: 368
Item Type: Working Paper
Keywords: Art and collectibles, Risk and return, Markowitz efficient frontier, Portfolio diversification
ISSN: 1324-5910
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2003 (please consult author)
Deposited On: 20 Aug 2004
Last Modified: 05 Jan 2011 23:23

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