The viability of classic automobiles as alternative investments : a qualitative approach

Abstract

This dissertation will focuses on emotional and collectible assets with the primary asset of choice being classic cars. More specifically the aim of this study is to assess whether classic and collectible cars could be classified as legitimate alternative assets within the financial sector. This will be achieved through a comparison of the historical prices of two indices as proxies for the classic car market and US stock market respectively, throughout three sample periods. Each sample period was chosen to simulate different market conditions to provide the necessary results to answer the original research question. Results about the investment performance, diversification capabilities and hedging benefits of classic cars will give an insight into the manner in which this asset could be utilised to maximise portfolio performance. In conclusion, this study found that over an 11-year period from 2005 to 2016, classic cars outperformed the stock market whilst simultaneously being minimally correlated and less volatile it the same market. Additionally a sub-period analysis allowed more detailed inferences to be made. During a bull market period following a financial crisis classic car returns were found to be negatively correlated to stock market returns presenting significant diversification opportunities. Finally a period of financial crisis revealed that while stock market cumulative returns fell by over 60%, classic car cumulative returns held a stable rate illustrating the strength of this asset as ‘store of value’