Emotional assets as an alternative investment for portfolio optimisation

Abstract

Over the last couple of decades, investors have been exploring new investments, moving from traditional investments, for instance, the stock and bond market to alternative investments. Emotional assets are a sub-set of alternative investments, mainly invested by high-net-worthindividuals (HNWIs). The main objective of this dissertation is to provide an understanding of a chosen selection of emotional assets, namely, fine art, fine wine, and classic cars. The research will study their contribution to a traditional portfolio, using three indices as proxies for the three emotional assets. The results suggest that for the medium-term period, both fine art and fine wine provide diversification benefits, however, fine wine was the preferable investment. Moreover, fine wine's possible hedge against inflation was established, predominately in times of high inflation. In addition, the sub-sample period show that the classic car market outperformed most asset classes in the post-financial crisis period. The classic car benchmark also provided diversification benefits, acting as a good addition to a traditional portfolio.