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My kingdom for a horse (or a classic car)

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  • Laurs, Dries
  • Renneboog, Luc

Abstract

This paper investigates the price determinants and investment performance of classic cars comprising various categories starting from veteran cars (built between 1888 and 1907) up to modern classics (built between 1975 and 1990). We examine a sample of 29,000 classic car auction sales conducted globally between 1998 and 2017. A hedonic pricing methodology is used to construct several classic car price indices, which enable a risk-return analysis. Classic cars appreciated annually by 3.37% and 5.63%, respectively in real and in nominal terms before transaction costs. Investments in ‘blue chip’ classic cars (12.50%) and Italian classics (11.28%) generate the highest annual nominal returns. On a risk-adjusted basis, classic cars have outperformed equity and other emotional assets such as art, but underperformed bonds and gold over the past two decades. The risk-adjusted returns on the category of affordable classics are similar to those of equity investments.

Suggested Citation

  • Laurs, Dries & Renneboog, Luc, 2019. "My kingdom for a horse (or a classic car)," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 58(C), pages 184-207.
    • Handle: RePEc:eee:intfin:v:58:y:2019:i:c:p:184-207
    DOI: 10.1016/j.intfin.2018.10.002
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    Cited by:

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    2. Kleine, Jens & Peschke, Thomas & Wagner, Niklas, 2020. "Rich men’s hobby or question of personality: Who considers collectibles as alternative investment?," Finance Research Letters, Elsevier, vol. 35(C).
    3. Heinrich Ursprung, 2020. "Jane Beats Them All: Price Formation and Financial Returns to Investing in Rare Books," CESifo Working Paper Series 8302, CESifo.
    4. Li, Yuexin & Ma, X. & Renneboog, Luc, 2021. "Pricing Art and the Art of Pricing : On Returns and Risk in Art Auction Markets," Discussion Paper 2021-018, Tilburg University, Center for Economic Research.
    5. Kleine, Jens & Peschke, Thomas & Wagner, Niklas, 2021. "Collectors: Personality between consumption and investment," Journal of Behavioral and Experimental Finance, Elsevier, vol. 32(C).

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    More about this item

    Keywords

    Alternative investments; Collectibles; Emotional assets; Hedonic regression; Collectible cars; Vintage cars;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature
    • Z23 - Other Special Topics - - Sports Economics - - - Finance

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