LEGO - The Toy of Smart Investors
27 Pages Posted: 17 Dec 2018
Date Written: April 2018
We study a new alternative investment asset - LEGO sets. LEGO is an iconic toy with diminishing over time supply and a high collectable value. A huge secondary market for LEGO sets with tens of thousands of transactions per day has developed since the turn of the century. We find that LEGO investments outperform large stocks, bonds, gold and other alternative investments, yielding the average return of at least 11% (8% in real terms) in the sample period 1987-2015. Small and huge sets, as well as seasonal, architectural and movie-based sets, deliver higher returns. LEGO returns are not exposed to market, value, momentum and volatility risk factors, but have an almost unit exposure to the size factor. A positive multifactor alpha of 4-5%, a Sharpe ratio of 0.4, a positive return skewness and a low exposure to standard risk factors make the LEGO toy an attractive alternative investment with a good diversification potential.
Keywords: Alternative Investments, Collectible Assets, Emotional Assets, LEGO, Portfolio Diversification
JEL Classification: G12, G14, G15
Suggested Citation: Suggested Citation