Art as an Investment: A Portfolio Allocation Analysis

The role of art in a portfolio of investments is examined using Sotheby's art index as & proxy for returns on art investments. Historical data for portfolios of artwork and other financial securities over the period 1981 to 1990 are used to construct the optimal mean‐variance portfolio. The art investment receives over 36% of this portfolio. This large percentage can be traced in part to the low correlation of art returns to the returns of other financial securities. Clearly investments in art deserve the serious consideration of mean‐variance investors