Diversification benefits of luxury watches and day-of-the-week effects in a seven-day traded market

Abstract

We show that luxury watches - particularly Rolex, Patek Philippe, and Audemars Piguet - yield significant diversification benefits when being added to well-diversified portfolios comprising stocks, bonds, and gold, and even outperform them on a risk-adjusted basis. All luxury watch returns exhibit remarkable low volatility most comparable with bonds while being uncorrelated with traditional asset classes. Evaluating day-of-the-week effects, this study also identifies that watch returns are generally lower on Sundays. This is likely because most sellers are professional dealers who do not edit their offers on Sundays, which is typically a day of rest.

Keywords: Collectibles, Luxury watches, Alternative Investments, Portfolio diversification, Empirical asset pricing, Day-of-the-week effects

JEL Classification: G10, G11