Convenience Yields of Collectibles

Abstract

We propose a novel method to estimate convenience yields of collectibles based on factor mimicking portfolios. Using up to 110 years of collectibles returns for 13 distinct asset classes, we apply machine learning techniques to address challenges from non- synchronous trading. We use these estimates to study how convenience yields affect equilibrium pricing. Convenience yield estimates for 24 of our 30 collectibles return series are positive, with an annualized mean (median) of 2.64% (2.53%). Despite various forms of underestimation, these results provide evidence that assets with positive emotional returns have lower equilibrium  financial returns. This  finding has important implications for ESG investing.

Keywords: Collectibles, convenience yields, emotional dividends, sustainable invest- ing, non-pecuniary returns, machine learning

JEL Classification: C14, C38, C55, G11, G14