Modern Portfolio Diversification with Arte-Blue Chip Index

TL;DR

This paper introduces the Arte-Blue Chip Index, a new metric for assessing blue-chip art as a diversification asset, showing it can improve risk-adjusted returns with comparable volatility to stocks.

Contribution

It develops the Arte-Blue Chip Index based on extensive transaction data, providing a novel quantitative tool for evaluating art as an investment asset class.

Findings

A 20% allocation to blue-chip art improves risk-adjusted returns by 20%.

Blue-chip art exhibits volatility similar to the S&P 500.

The index tracks 100 top-performing artists from 1990 to 2024.

Abstract

This paper presents a novel approach to evaluating blue-chip art as a viable asset class for portfolio diversification. We present the Arte-Blue Chip Index, an index that tracks 100 top-performing artists based on 81,891 public transactions from 157 artists across 584 auction houses over the period 1990 to 2024. By comparing blue-chip art price trends with stock market fluctuations, our index provides insights into the risk and return profile of blue-chip art investments. Our analysis demonstrates that a 20% allocation of blue-chip art in a diversified portfolio enhances risk-adjusted returns by around 20%, while maintaining volatility levels similar to the S&P 500.