Three empirical chapters addressing investments in real, alternative
assets are presented in this thesis.
Chapter 2 focuses on fine art as an investment. In recent years, the art
market has been characterized by final auction prices greatly exceeding the exante
estimates published by international auction houses. We define this
difference as a rarity premium and build a ‘Rarity Index’ by aggregating the
premia relative to the mean. We also investigate the benefits, outside financial
performance, associated with art ownership and introduce the term of ‘ownership
yield’, meant to encapsulate both aesthetic yield and features of conspicuous
consumption. This ownership yield may account for the large differences between
the values of rarity indexes we construct for three famous families of paintings
over the period 2003 to 2013.
In Chapter 3, we turn our attention to residential real estate in alpha cities.
We argue that relative price changes in prime property markets have greatly
deviated from non-prime markets on a national level, while similarities across
prime markets in different countries have increased. In order to illustrate the
extent of these changes, we introduce a novel ‘luxury ratio’ and perform several
statistical analyses on repeat-sales price indexes over the period 2003 to 2014.
Taking the case of London, we show how the luxury ratio has evolved over the
past two decades with respect to other UK cities. Results support the existence of
an ownership yield in a world where high (and ultra-high) net worth individuals
are growing in number and search for exclusiveness through the possession of
distinctive residential property. Chapter 4 targets two types of commercial real estate: data centers and
shopping complexes (companies specializing in malls, shopping centers, and
outlets). First, with price indexes based on US REITs, we analyze short-term and
long-term relationships between the S&P 500 and several commercial real estate
categories using Engle-Granger cointegration over the period 2009 to mid-2016.
We find no cointegration between data centers and the S&P 500, or retail
(representing shopping complexes) and the S&P 500, indicating that both sectors
are not merely an attractive investment in their own right, but also portfolio
diversifiers. Second, turning to individual firms, we perform a CAPM analysis of
41 international companies. Results show that, on average, price returns from
data centers surpass those of shopping complexes; moreover, US companies
specializing in malls, shopping centers, and outlets outperform those of similar
firms abroad. Finally, we indicate a further avenue for data centers in relation to
electricity storage, and explain implications for investors
