Art as a Financial Asset in Portfolio Allocation

With increasing interest in recent years, investors have devoted attention to the art market as a potential alternative asset class to be included in portfolios. Besides cultural and aesthetic value, investment in art could provide diversification benefits, and a hedge against market volatility and inflation. We use data on the global art auction market to analyze this asset’s risk-return characteristics, and to investigate its inclusion in optimal portfolios, based on the classical Markowitz mean-variance and the mean-CVaR optimization models. The results show that art makes an interesting asset, which enters the optimal portfolios.