First Faculty Advisor
Alternative Investments; Collectibles; Portfolio Optimization; Investments; Price Indices
This paper investigates the feasibility of non-traditional alternative investments in portfolios. Non-traditional alternative investments are defined by this paper as collectibles, such as classic cars, art, and wine. Some of these assets have been around for decades and are increasingly becoming more available to investors. This asset class is grouped with assets that are not easily tradable like traditional equities and bonds and do not generate cash flows. This makes valuing the intrinsic value of collectibles difficult. However, academic research has shown that non-traditional alternative investments do have a track record worth investing in. Parts of the market are becoming securitized so that individual investors can own a share of a collectible. With this growing popularity, this paper aims to find the feasibility of these investments in an individual’s portfolio. Furthermore, it examines the optimal asset allocation between traditional investments and non-traditional investments and compares the long-run risk and return of these asset allocation strategies.