Date of Award
Spring 2022
Degree Name
Bachelor of Science (BS)
Advisor(s)
Kevin Mirabile
Abstract
This thesis is aimed at expanding research that has previously been conducted on the efficacy of collectibles as an alternative investment, and their impact on a portfolio. Specifically, this thesis is focused on the implementation of a Collectibles index into portfolios. The thesis examines the overall implementation of a Collectibles index in the portfolio as well as the impact during times of high inflation. Collectibles such as luxury goods are typically traded at auction, and therefore can be hard to track the prices of. The Knight Frank Luxury Investment Index (KFLII) is a one-of-a-kind index produced by Knight Frank that tracks the performance of a basket of ten collectible indices over time. This index uses third party collectible indices that track baskets of specific collectibles. Typically, collectibles vary in value based upon several factors, including the rarity, condition, as well as the demand for that good at the time. Based upon price data provided by Knight Frank for each of the baskets of collectibles, a new collectible index was created and tracked over the period of ten years. These collectibles were then compared to the S&P500 as well as the iShares Core US Aggregate Bond ETF (AGG). Following analysis completed using a descriptive statistics table, it was found that collectibles maintained more stable returns than more traditional investments. The collectibles were then implemented into a portfolio of 50% S&P500 returns, 30% AGG returns, and 20% Collectibles Index returns. This portfolio was compared using a t-test and regression to a portfolio consisting of 60% S&P500 returns and 40% AGG returns. The findings show that while the mean returns did not vary significantly, the overall performance of the portfolio that included collectibles created alpha. Finally, the thesis examined the performance of these same two portfolios during periods where the inflation was above average for the 10-year span. The thesis found that during these times, alpha was still generated by the portfolio containing collectibles and the alpha was slightly larger, making the case for the use of collectibles to hedge the portfolio during times of high inflation.
Recommended Citation
Barback, John, "Exotic Alternatives and their Impact on Portfolios" (2022). Gabelli School of Business Honors Thesis Collection. 30.
https://research.library.fordham.edu/gabelli_thesis/30
