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Hard assets: The returns on rare diamonds and gems

Author

Listed:
  • Christophe Spaenjers

    (HEC Paris - Recherche - Hors Laboratoire - HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Luc Renneboog

    (Department of Finance - Tilburg University [Netherlands])

Abstract

This note examines the investment performance of diamonds and other gems (sapphires, rubies, and emeralds) over the period 1999-2010, using a novel data set of auction transactions. Over our time frame, the annualized real USD returns for white and colored diamonds equaled 6.4% and 2.9%, respectively. Since 2003, the average returns have been 10.0%, 5.5%, and 6.8% for white diamonds, colored diamonds, and other gems, respectively. Both white and colored diamonds outperformed stocks between 1999 and 2010. Nevertheless, gem returns covary positively with stock returns, underlining the importance of wealth-induced demand for luxury consumption in collectibles markets.

Suggested Citation

  • Christophe Spaenjers & Luc Renneboog, 2012. "Hard assets: The returns on rare diamonds and gems," Post-Print hal-00758542, HAL.
    • Handle: RePEc:hal:journl:hal-00758542
    DOI: 10.1016/j.frl.2012.07.003
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    References listed on IDEAS

    as
    1. William N. Goetzmann & Luc Renneboog & Christophe Spaenjers, 2011. "Art and Money," American Economic Review, American Economic Association, vol. 101(3), pages 222-226, May.
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    7. Dimson, Elroy & Spaenjers, Christophe, 2011. "Ex post: The investment performance of collectible stamps," Journal of Financial Economics, Elsevier, vol. 100(2), pages 443-458, May.
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    Cited by:

    1. Eric Fur, 2023. "Risk and return of classic car market prices: passion or financial investment?," Journal of Asset Management, Palgrave Macmillan, vol. 24(1), pages 59-68, February.
    2. Rita Laura D’Ecclesia & Vera Jotanovic, 2018. "Are diamonds a safe haven?," Review of Managerial Science, Springer, vol. 12(4), pages 937-968, October.
    3. Luc Renneboog & Christophe Spaenjers, 2013. "Buying Beauty: On Prices and Returns in the Art Market," Management Science, INFORMS, vol. 59(1), pages 36-53, February.
    4. Heinrich Ursprung, 2020. "Jane Beats Them All: Price Formation and Financial Returns to Investing in Rare Books," CESifo Working Paper Series 8302, CESifo.
    5. Vera Jotanovic & Rita Laura D’Ecclesia, 2019. "Do Diamond Stocks Shine Brighter than Diamonds?," JRFM, MDPI, vol. 12(2), pages 1-19, May.
    6. Jean Marcelin B. Brou & Mbodja Mougoué & Eugene Kouassi & Kebaabetswe Thulaganyo & Benjamin K. Acquah, 2022. "Effects of diamond price volatility on stock returns: Evidence from a developing economy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1025-1043, January.
    7. Renneboog, L.D.R., 2013. "The Returns on Investment Grade Diamonds," Other publications TiSEM 8f089609-a8e5-4587-8f22-a, Tilburg University, School of Economics and Management.
    8. Anne-Sophie V. Radermecker & Koenraad Brosens, 2023. "Valuing European tapestry: from riches to rags," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 47(3), pages 359-406, September.
    9. Luc Renneboog, 2015. "Investing in Diamonds," Business and Economic Research, Macrothink Institute, vol. 5(1), pages 166-195, June.
    10. Laurs, Dries & Renneboog, Luc, 2019. "My kingdom for a horse (or a classic car)," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 58(C), pages 184-207.
    11. Li, Yuexin & Ma, X. & Renneboog, Luc, 2021. "Pricing Art and the Art of Pricing : On Returns and Risk in Art Auction Markets," Other publications TiSEM 8d25ec25-78dc-4cdc-b054-f, Tilburg University, School of Economics and Management.
    12. Anne-Sophie Radermecker & Koenraad Brosens, 2023. "Valuing European tapestry: from riches to rags," ULB Institutional Repository 2013/371370, ULB -- Universite Libre de Bruxelles.
    13. Scharnowski, Matthias & Scharnowski, Stefan & Zimmermann, Lukas, 2023. "Fan tokens: Sports and speculation on the blockchain," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 89(C).
    14. Dobrynskaya, Victoria & Kishilova, Julia, 2022. "Lego: The Toy Of Smart Investors," Research in International Business and Finance, Elsevier, vol. 59(C).
    15. Bedoui, Rihab & Guesmi, Khaled & Kalai, Saoussen & Porcher, Thomas, 2020. "Diamonds versus precious metals: What gleams most against USD exchange rates?," Finance Research Letters, Elsevier, vol. 34(C).
    16. Esmeralda A. Ramalho & Joaquim J.S. Ramalho, 2014. "Convenient links for the estimation of hedonic price indexes: the case of unique, infrequently traded assets," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 68(2), pages 91-117, May.
    17. Potrykus, Marcin, 2022. "Diamond investments – Is the market free from multiple price bubbles?," International Review of Financial Analysis, Elsevier, vol. 83(C).
    18. Auer, Benjamin R. & Schuhmacher, Frank, 2013. "Diamonds — A precious new asset?," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 182-189.
    19. Savva Shanaev & Nikita Shimkus & Binam Ghimire & Satish Sharma, 2020. "Children’s toy or grown-ups’ gamble? LEGO sets as an alternative investment," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 21(5), pages 577-620, November.
    20. Victoria Dobrynskaya & Julia Grebennikova, 2023. "Financial returns in reward-based crowdfunding," Economic Analysis Letters, Anser Press, vol. 2(3), pages 1-9, May.
    21. Low, Rand Kwong Yew & Yao, Yiran & Faff, Robert, 2016. "Diamonds vs. precious metals: What shines brightest in your investment portfolio?," International Review of Financial Analysis, Elsevier, vol. 43(C), pages 1-14.
    22. Onneetse L Sikalao-Lekobane, 2014. "Do Macroeconomic Variables Influence Domestic Stock Market Price Behaviour in Emerging Markets? A Johansen Cointegration Approach to the Botswana Stock Market," Journal of Economics and Behavioral Studies, AMH International, vol. 6(5), pages 363-372.

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    More about this item

    Keywords

    Alternative investments; Auctions; Diamonds; Gems; Hedonic regression; Luxury goods;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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