Correspondence: R.A.J. Campbell, Finance Department, LIFE/Maastricht University, PO Box 616, 6200MD Maastricht, The Netherlands. Tel: +31 43388 4827; Fax: +31 43388 4875; E-mail: R.Campbell@FINANCE.unimaas.nl

¹completed her PhD on risk management in international financial markets at Erasmus University, Rotterdam in 2001. She currently works at the University of Maastricht as an assistant professor of finance. Her work has been published in a number of leading journals, including the Journal of International Money and Finance, Journal of Banking and Finance, Financial Analysts Journal, Journal of Portfolio Management, Journal of Empirical Finance, Journal of Risk and Derivatives Weekly. She teaches for Euromoney Financial Training on art investment and works as an independent economic advisor for The Fine Art Fund in London, and for Fine Art Wealth Management, UK. She currently is a member of the supervisory board of ARTESTATE GmbH, based in Germany.

Received 13 December 2007; Revised 13 December 2007.

Abstract

The continual search to reap higher risk-adjusted returns has led to a number of highly alternative assets to be considered for financial investment purposes. Recently, a number of funds have emerged to indirectly invest in the arts sector. The focus has been on fine art, wine and more recently into the possibility of investing into other collectible items and memorabilia. One such area is musical instruments. In this paper, we take a look at the violin sector in particular, which has shown steady annual growth in market value over the past half century; fuelled by a combination of a shortage in supply at the high end of the market and a continued increase in global demand. Using data collected from auction houses and private dealers, we analyse the risk-return characteristics of the violin sector, compare it to other financial assets and assess the implications for portfolio diversification and the ability of pension houses to benefit from this sector.