Les Cahiers de Recherche - HEC Paris
The Long-Term Returns to Durable Assets
Abstract: I study the returns to investments in durable assets since
the start of the twentieth century. These assets are generally
characterized by relatively low capital gains and substantial price
fluctuations. The rate of value appreciation has been more pronounced for
collectibles, but transaction costs are very high in such markets as well.
However, a rental income yield can add substantially to the returns on
housing and land, and likewise owners of collectibles may receive a
significant emotional dividend. Because of the lack of such an income or
utility stream, gold, silver, and diamonds appear to have been particularly
bad long-term investments (at least if not held in the form of jewelry).
Finally, durable assets are unlikely to be good inflation hedges, but they
may still help diversifying a portfolio because of the imperfect
correlations with financial assets.
Keywords: returns; housing; land; art; collectibles; gold; silver; diamonds; (follow links to similar papers)
JEL-Codes: G01; N20; (follow links to similar papers)
11 pages, March 11, 2016
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