Time is Money: an Investment in Luxury Watches †

Philippe Masset ‡ & Jean-Philippe Weisskopf §

This version: January 2025

Abstract

This study examines the risk and return characteristics of luxury watch investments. The luxury
watch market offers lower returns than equities but is less volatile. It also outperforms fixed
income and real estate, with significant performance variation across brands. Illiquidity,
analogous to other collectables, is an important feature, yet luxury watches enhance portfolio
diversification and reduce risk. Additionally, the study contrasts the distinct features of
investing in physical watches versus stocks of watch manufacturers, emphasising the
importance of understanding market segmentation. These findings highlight the role of luxury
watches as an alternative asset in diversified investment portfolios.

Keywords: watch; portfolio; liquidity; investment; return; risk

JEL codes: G11; G41; Z1

†
The authors have no relevant financial or non-financial interests to disclose.
‡
EHL Hospitality Business School, HES-SO Haute école spécialisée de Suisse Occidentale, Route de Berne 301,
CH-1000 Lausanne, Switzerland. Mail: [email protected]
§
EHL Hospitality Business School, HES-SO Haute école spécialisée de Suisse Occidentale, Route de Berne 301,
CH-1000 Lausanne, Switzerland. Mail: [email protected] (corresponding author).
1 Introduction

Time is precious. While one may philosophically debate this, it is undoubtedly true for

timepieces such as the Patek Philippe Grandmaster Chime, which sold for USD 31.9 million

at Christie’s in 2019. With the difficulty of purchasing luxury watches through authorised

retailers and the boom in collectables, the secondary market for luxury watches 1 has grown

considerably in terms of both returns and trade volumes over the past decade. The secondary

market is now estimated at USD 24 billion, or a third of the overall luxury watch market

(Dupreelle et al., 2023). While academia has examined other collectables (e.g., Masset and

Weisskopf (2018b)) rather extensively, to the best of our knowledge, there is a lack of

investigation into the investment performance of watches. Thus, this paper aims to yield

insights into this market and analyse the risk and return characteristics of an investment in

luxury timepieces.

To perform this analysis, this paper first describes the practical characteristics of the watch

market. It then compares the risk and return characteristics of the watch market as a whole and

of 13 of its best-known and most-traded brands over the period January 2019 to September

2024 using indices provided by Chrono24. It also highlights the impact that the illiquidity in

the watch market can have on these metrics. Finally, it takes the perspective of an investor

looking to diversify a traditional investment portfolio with watches by creating different

portfolios and examining the benefits of adding watches to them.

Our analysis suggests that watches can be a valuable addition to a diversified investment

portfolio. Although they offer lower returns than equity, their lower risk profile and low

correlation with the stock market make them an attractive option for investors seeking to reduce

portfolio risk. However, it is important to have a clear understanding of the market segmentation

and dynamics behind certain watch brands or specific watch models, as these can have a strong

1
For brevity, we will use the term watches instead of luxury watches in the remainder of the article.

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impact on performance. For example, brands such as Panerai and Tudor do not offer the same

risk and return profile as the overall market or watch brands such as Audemars Piguet or Patek

Philippe. As with many other collectables, illiquidity is also an issue when investing in the

watch market. Moreover, it is important to distinguish between trading physical watches and

investing in the shares of watchmakers. The latter has both high return and high risk and, more

critically, does not allow for pure watch investments as larger fashion or jewellery groups own

most watch brands.

This study makes several contributions to the academic literature and the broader financial

industry. For academics, it adds to the growing body of research on collectables by providing a

detailed analysis of the risk-return dynamics of the luxury watch market. This area has yet to

receive academic attention. It highlights the segmentation within the market and the

heterogeneity of performance across brands and provides new insights into the role of illiquidity

and behavioural factors in collectable markets. For practitioners, the study offers insights into

the diversification benefits of including watches in an investment portfolio. The findings

suggest that luxury watches can be a suitable investment option for (ultra) high-net-worth

individuals seeking diversification and lower risk while indulging in a niche passion.

Nevertheless, investors need to conduct a thorough analysis and gain a comprehensive

understanding of the market to make well-informed decisions. Therefore, investors should

consider at least two factors when incorporating watches into portfolios. As for most

collectables, a longer investment horizon is needed to offset short-term fluctuations but, more

importantly, to counterbalance illiquidity issues in the watch market. Moreover, investors

should comprehensively understand the luxury watch market, including its prevailing trends,

key players, and the factors influencing prices, which can be very granular and not immediately

perceptible to market outsiders.

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 The remainder of the article is structured as follows: section 2 reviews the literature, and

section 3 presents the luxury watch market. Section 4 presents the data, while Section 5

discusses the empirical results. Finally, section 6 highlights the main takeaways and practical

implications for the finance industry and proposes ideas for future work.

2 Literature review

2.1 Financial performance of collectables

The luxury watch industry can be related to the broader field of passion or luxury

investments, such as classic cars, fine wine and whisky, art or stamps. Literature on the

performance and risk of collectables generally suggests that the ‘collectables’ umbrella segment

conceals significant variation between different types (watches vs. wine, for example). It also

indicates that different kinds of collectables interact in different ways with the financial

markets. Lastly, sizeable intra-market segmentation has been detected (Masset & Weisskopf,

2018b). Overall, collectables yield mixed results in terms of performance but offer

diversification benefits.

According to Goetzmann (1993), art has outperformed fixed income and equity over the past

150 years. However, Mei and Moses (2002) find a performance of only 4.9% over the 20th

century, and Renneboog and Spaenjers (2013) report real returns of 4.0% since 1957 with a

worse risk-return profile than financial assets. They conclude that art underperforms equity and

does not perform better than fixed income. However, it outperforms gold, real estate, and

commodities. Results on the diversification benefits of art in a multi-asset portfolio are similar.

Worthington and Higgs (2004) demonstrate that the low cross-correlation of art with financial

assets only results in limited diversification benefits. However, this may be alleviated if

investors put their money into specific art segments (Worthington & Higgs, 2003). Kraeussl

and Logher (2010) confirm that overall returns are relatively low despite the significant risk.

However, submarkets may offer good returns, low correlations, and low market betas.

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 Sanning et al. (2008) and Fogarty (2010) find significantly positive risk-adjusted returns on

the fine wine market. In a long-term study of Bordeaux wine prices over the 20th century,

Dimson et al. (2015) further show that wine underperforms equity with a return of 5.3% (4.1%

after transaction costs) but outperforms other collectables. Furthermore, fine wine offers

diversification benefits, particularly during crises, and its evolution depends on the sub-market

(Masset, 2024; Masset & Henderson, 2010; Masset & Weisskopf, 2018a).

A study conducted by Lennon and Shohfi (2021) on bourbon reveals an annual return of

9.1%. Additionally, they demonstrate the benefits of adding bourbon to a financial portfolio.

Tegtmeier (2022) finds similar results in the whisky market by showing that rare whisky

exhibits different risk-return characteristics compared to financial assets, making it a valuable

addition to a portfolio. Le Fur (2023a) indicates positive returns and high and heterogeneous

volatility in the whisky market. However, the correlations between the different whiskies are

almost zero, suggesting potential benefits in terms of portfolio diversification.

According to Martin (2016), classic cars have better risk-adjusted returns and diversification

benefits than equity, fixed income, and gold. Laurs and Renneboog (2019) find a real return of

3.37% before transaction costs in this market, although results vary in sub-markets. In this,

classic cars outperformed equities but underperformed fixed income and gold. Le Fur (2023b)

further concludes that investing in classic cars is primarily a passion investment rather than a

financial one.

Veld and Veld-Merkoulova (2007) demonstrate that stamps have a beta coefficient close to

zero and a positive alpha. Dimson and Spaenjers (2011) indicate that over the 20th century,

stamps underperformed equities but outperformed fixed income. Although its volatility is in

line with equities, the low systematic risk of stamps allows for diversification gains.

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2.2 The emotional yield of investing in collectables

While financial performance remains crucial for most watch investors, non-financial

motivations may also shape market dynamics. Watches are considered passion goods that are

often valued beyond their monetary value due to their psychological, social and cultural

significance (Kleine et al., 2020; Laurs & Renneboog, 2019). Collectors, who represent a

significant proportion of market participants, are often driven by these non-financial factors,

which include the desire for status, expression of identity, and emotional satisfaction.

From a psychological perspective, watches are symbols of personal achievement and

identity. Belk (1988) suggests that luxury possessions, such as high-end watches, often serve

as an extension of the self, contributing to one's sense of identity and self-worth. This is

consistent with Hirschman and Holbrook (1982), who emphasise that luxury consumption is

often motivated by emotional attachment and personal meaning rather than utilitarian value.

For example, owning iconic watches allows individuals to project success and sophistication,

fostering an emotional connection that goes well beyond mere financial gain (Kapferer &

Bastien, 2012).

These emotional and social motivations directly impact supply and demand and are

important drivers of price fluctuations. Collectors are often willing to pay significant premia

for rare pieces, suggesting that market prices are influenced by emotional value as well as

traditional investment logic (Laurs & Renneboog, 2019). In such cases, price spikes are linked

to the symbolic or social capital associated with the watch rather than its intrinsic financial

value (Hirschman & Holbrook, 1982). This highlights the complex interplay between

emotional, social and financial factors in the luxury watch market, where non-financial

motivations shape both consumer behaviour and price trends.

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3 The luxury watch market

3.1 How is the market structured?

A small number of companies control the luxury watch market. Table 1 illustrates the 20

largest watch brands by estimated revenue in 2023. Rolex is the largest watchmaker by a

significant margin, with revenues approaching 10 billion Swiss francs (CHF) and a market share

estimated at around 30%. Overall, eight brands display sales of more than one billion CHF. The

market is dominated by listed groups that own multiple brands (LVMH, Richemont and Swatch

Group) and family-run private companies that own only one watch brand. Moreover, revenue

is concentrated in luxury watches, except Longines, Tissot and Swatch, which are all owned by

the Swatch Group and cater to the entry- to mid-market level.

[Insert Table 1 here]

3.2 How to invest in luxury timepieces and how much does it cost?

Sourcing a watch in the primary market is relatively inexpensive and involves placing an

order with a specialist mono- or multi-brand retailer. Most luxury watch brands charge similar

or identical prices nationally and internationally. However, the most prestigious watches have

become very difficult to obtain. Not only are quantities limited to one watch per customer, but

you must be a good customer to get the most sought-after timepieces. Finally, scarcity can lead

to delivery times of up to half a decade.

When it comes to the secondary market, costs are more variable and depend heavily on the

distribution channel. For experienced investors, trading directly with other collectors is

recommended. Trust is crucial when watches change hands, and having a network of trusted

individuals can lead to better prices and access to rare timepieces.

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 For less informed investors, there are different possibilities, such as auction houses or online

platforms, with different costs and fee structures, which can significantly impact overall return.

Auction houses such as Sotheby's, Phillips and Christie's typically charge higher fees than

online platforms. For buyers, auction houses often charge a buyer's premium of 20% to 25% on

top of the hammer price. There may also be additional costs such as catalogue fees, photography

and transport. These fees make auction houses a more expensive option, although they provide

access to a highly competitive marketplace and a more professional service for high-end

timepieces.

With regard to online platforms, the fee structure is simpler and sometimes more affordable.

Chrono24, for example, charges a flat commission of 6.5% of the sale price, capped at €299.

Buyers on Chrono24 also avoid the high premiums of auctions, paying only the listed price plus

taxes and shipping costs. Another example is WatchBox, which has a different business model.

Instead of charging separate fees, WatchBox acts as both buyer and seller, making its profit

from the spread between the purchase and resale price of a watch. This spread ranges from 20%

to 40%, depending on the model.

3.3 What to look for in luxury timepieces

Like any collectable, luxury watches have various factors affecting their investment

potential.

The condition of the luxury watch is essential. A well-maintained watch will remain more

valuable than a heavily worn one. It is also important to look for watches with original

components (e.g., dial, hands, and crown). A reputable watchmaker should have serviced and

repaired the watch using original parts only.

Authenticity is another crucial factor. Luxury watches are frequently manufactured in

limited quantities, resulting in high demand and, unfortunately, a counterfeit trade (Khan et al.,

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2021). Obtaining complete documentation, including the original packaging, certification and

authenticity guarantees, is recommended to ensure authenticity.

The brand legacy of the watch manufacturer is an important factor, with well-known watch

brands commanding higher prices (Kern, 2017). The watch market is dominated by the holy

trinity of Rolex, Patek Philippe, and Audemars Piguet. However, some small and exclusive

brands may also be valuable due to their exclusivity and low production volumes (e.g., Richard

Mille).

The value of a watch is greatly influenced by its model (Munz, 2018). Watches made from

precious metals or that include gems are more valuable. The importance of the movement in

determining the value of a watch also should be addressed. Mechanical movements are

generally more valuable than electronic ones. Additionally, complications (e.g., perpetual

calendars) can significantly increase prices. Craftsmanship contributes considerably to the

value of a watch. Therefore, it is important to thoroughly understand the watchmaking process,

including the intricacies that can impact pricing. For example, some watchmakers take up to

two years to build and test a watch. Finally, limited editions are often more valuable due to their

uniqueness and scarcity.

Compared to other collectables, the importance of storytelling is significant for watch

enthusiasts (Athwal & Harris, 2018; Kern, 2017). For instance, the Omega Seamaster is widely

known for being the James Bond watch. Being on the wrists of a celebrity can boost demand

for a luxury timepiece. The Cartier Tank Française became famous after appearing on Princess

Diana’s wrist. Another example is the Omega Speedmaster Professional, used on the Apollo

11 mission.

4 Data

Chrono24 publishes different indices on its website. The ChronoPulse Watch Index is the

benchmark for the overall market. The index uses data from the pre-owned watch market's 14

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bestselling brands over the previous three years. Each brand's ten bestselling models are then

used for the index. Thus, the index tracks the prices of 140 watches. Each watch is included in

proportion to its transaction volume. The index is based on the Laspeyres methodology, and the

selection and weighting of the individual models are updated bi-annually. Concurrently, sub-

market indices are obtained for the most traded watch brands (Audemars Piguet, Breitling,

Cartier, Hublot, IWC, Jaeger LeCoultre, Omega, Panerai, Patek Philippe, Rolex, TAG Heuer,

Tudor, and Vacheron Constantin).

To compare the risk and return characteristics of the watch market, we download price data

on common asset classes from Refinitiv. These include the MSCI World as a proxy for the

global equity market and the IBOXX Treasuries and IBOXX Corporates, representing the

global fixed-income market. To analyse tangible assets, we examine commodities (S&P GSCI

Commodity Index), gold, and global real estate (FTSE EPRA/NAREIT Global). These assets

are commonly included in investor portfolios (Masset & Weisskopf, 2018b). Finally, we also

download weekly price data for four listed watch manufacturers that own 13 of the top 20

brands of the luxury watch universe presented in Table 1. These include Hermès, LVMH,

Richemont, and Swatch Group.

All watch and financial indices and stock prices were converted to USD when necessary,

and data from January 2019 to September 2024 was used.

5 Empirical results

5.1 Descriptive statistics

Figure 1 shows the fluctuation of the different asset classes over time. Watches show a solid

positive trend until early 2022, followed by a decline until the end of the sample period. Equity

and gold have outperformed since the end of 2022, outperforming watches until the end of the

sample period. Finally, real estate and fixed income performed poorly throughout the sample

period.

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 Figure 2 shows how the watch sub-indices changed over the period. The three panels show

the heterogeneity in market performance. Panel A suggests that the overall watch market is

driven by the performance of the high-yielding sub-indices, which also make up the majority

of the components of the overall index. These include Rolex and Vacheron Constantin, which

more than doubled in price between 2019 and 2022 and have continued to show a return of

more than 50% since then. Meanwhile, Audemars Piguet and Patek Philippe, which are the

best-performing brands, tripled in price between 2019 and 2022. However, the two brands

roughly doubled over the total period (i.e. from January 2019 to September 2024). Panel B

shows watch brands such as Cartier, Jaeger-LeCoultre and Omega, which show a more

moderate price increase of between 30% and 50% over the sample period and do not peak in

2022, unlike the brands in Panel A. Finally, Panel C shows the remaining watch brands, which

display a modest performance. IWC, Panerai and Tudor lost in value, while Breitling, Hublot

and TAG Heuer show a performance of around 5-10% over the sample period. Here again, there

is no price peak in 2022. Overall, the evolution indicates that the three watch brands in panel A

can be seen as true collectables while the other brands still resemble consumer goods.

[Insert Figure 1 and 2 here]

Table 2 shows descriptive statistics for the various watch indices, the other asset classes and

the shares of listed watch companies. Overall, the watch market (5.68% annual return)

underperformed equities (12.85%) and gold (13.06%) but outperformed fixed income (negative

returns) and real estate (3.14%). However, the watch market's volatility (3.90% annual

volatility) and range are the lowest of any asset class. The closest asset class in terms of risk is

fixed income, with a volatility of 5 to 8%. The watch market also has a slightly positive

skewness and kurtosis.

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 Nonetheless, as shown in Figure 2, the different watch sub-markets have performed very

differently. Audemars Piguet (11.68%) and Patek Philippe (10.92%) matched the performance

of equities in terms of returns. However, stocks still exhibit moderate risk (around 8% annual

volatility) and higher skewness and kurtosis than the watch market as a whole. In contrast,

Panerai and Tudor had negative returns. Overall, watches do not outperform all financial assets,

but segmentation within the market requires a more in-depth analysis.

Regarding the four listed watch manufacturers, LVMH, Hermès and Richemont performed

very well, while Swatch Group had a negative return over the sample period. All four

companies, however, display a high volatility compared to the MSCI World index. It should be

noted that only Swatch Group is a pure player in the watch industry. Hermès, LVMH, and

Richemont, while important for the watch industry, derive most of their business from fashion

and/or jewellery and are active across many of the markets in the luxury industry. This may

explain the differences in stock price changes.

[Insert Table 2 here]

5.2 Illiquidity on the watch market

Illiquidity is an essential factor in the collectables market, affecting risk and potentially

biasing results, as highlighted by Masset and Maurer (2021). Accurate and frequent price data

are essential for assessing risk, but such data is relatively rare in the context of collectables.

Although watches are traded more frequently than individual works of art, the market remains

far less liquid than stock markets. This lack of liquidity often leads to the re-use of outdated

prices in the construction of indices, which can smooth returns, induce positive autocorrelation

and lead to an underestimation of risk.

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 Figure 3 illustrates how illiquidity affects the volatility of the different watch indices.

Looking at the market as a whole, panel A shows that volatility increases as data frequency

decreases. In a highly liquid market, one would expect little or no change in volatility when

comparing weekly and quarterly data. However, for watches, moving from a higher to a lower

frequency leads to higher risk. Panel B, which focuses on high-yielding watch brands, shows a

similar trend. Here, the observed risk can double or even triple when comparing weekly and

quarterly frequencies, highlighting the importance of considering illiquidity when estimating

risk.

Panels C and D examine indices for watch brands with medium and low returns. These

indices show an oscillatory pattern in returns (see Figure 2), a phenomenon also observed in

other collectable markets, such as fine wines, as noted by McManus et al. (2013). Price reversals

often follow strong price movements in these markets, driven by factors such as emotional

attachment, passion for collecting and auction dynamics - where competition for specific items

can amplify these effects. Such fluctuations appear less marked for the most liquid and

investment-grade brands (Rolex, Patek Philippe and Vacheron Constantin). This suggests that

greater liquidity mitigates the influence of these reversal dynamics.

Table 3 provides annualised returns, volatilities and autocorrelation functions (ACFs) for the

watch indices with lags ranging from one to four weeks. As expected, there is positive

autocorrelation at lags 1 and 2. However, at lags 3 and 4, the autocorrelations turn significantly

negative for some indices. This reversal is greatest for indices representing watch brands that

have the lowest performance. In contrast, the best performing and more liquid brands

(Audemars Piguet, Patek Philippe, Rolex and Vacheron Constantin) show steadily declining

but positive autocorrelations, reinforcing the assertion that liquidity dampens the oscillatory

behaviour.

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 The reversal observed for less traded watches affects volatility. As shown in Figure 3, initial

reductions in data frequency lead to higher volatility. However, for frequencies below monthly,

the trend reverses, and volatility decreases again. This relationship between illiquidity, data

frequency and risk highlights the heterogenous nature of these sub-markets.

To address the distortions introduced by illiquidity, we follow Geltner (1993) and use an

autoregressive filter to unsmooth the original returns. We set the autoregressive filter equal to

the observed autocorrelation at lag 1. We do not consider a higher-order model because one lag

appears sufficient. Table 3 shows that this adjustment removes the positive autocorrelation in

weekly data while preserving the reversal effect of the watch market over longer time horizons.

[Insert Figure 3 and Table 3 here]

In Table 4, we examine the correlations between the filtered weekly returns of the watch

market with its sub-markets, other asset classes and the four listed watch manufacturers. Panel

A shows the cross-correlations between the different watch sub-markets. Again, there is some

heterogeneity. Rolex has by far the highest correlation with the overall market, as it represents

a large part of it. Audemars Piguet, Breitling, IWC, Omega and Patek Philippe have correlations

between 0.2 and 0.3, while all other brands have correlations around zero with the overall watch

market. The sub-market correlations are generally low, with an average of 0.03, and there is

little variation, with the lowest correlation being -0.14 and the highest around 0.28.

Panel B shows that the watch market has low correlations with traditional asset classes. The

highest correlation is 0.04 with equity and around zero or slightly negative with the other asset

classes. Therefore, the watch market appears to be a suitable diversification option compared

to financial assets, offering flexibility in portfolio composition.

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 Panel C shows minimal overlap between the physical luxury watch market and the four listed

watch manufacturers, with correlations of around 0.1. Conversely, the correlations of the four

stocks with equity are much higher, at around 0.6. Therefore, gaining exposure to physical

watches cannot be achieved by simply buying the stocks of watch manufacturers. This further

highlights the need to consider physical watches as a separate investment.

[Insert Table 4 here]

5.3 Portfolio analysis

Figure 4 analyses the impact of including watches in an investor's portfolio. We create three

different portfolios. Portfolio 0 is the benchmark portfolio, which invests only in traditional

assets (50% in equities, 30% in bonds, 15% in real estate and 5% in gold). Portfolio 1a invests

10% in watches and adjusts the other weights linearly, while Portfolio 1b invests 30% in

watches 2. Adding watches to a portfolio generally yields a similar annualised return of around

7.0 to 7.5% but reduces volatility by more than a quarter. The addition to the portfolio also

reduces the maximum drawdown from 24.54% to 17.81% and the 5% historical weekly value-

at-risk (VaR) from 2.22% to 1.56%. These results confirm the descriptive statistics that

investing in watches does not necessarily improve financial performance but significantly

impacts (portfolio) risk.

In unreported results, we also construct six additional portfolios to test the robustness of the

results. First, we recreate portfolios 1a and 1b using the Rolex index instead of the overall watch

market index. The choice to analyse Rolex is due to its strong brand image and tiny primary

market, an attractive segment that has led to higher liquidity in the second-hand market. The

2
We acknowledge that investors would not put as much weight on the luxury watch market but want to understand
the effect at a larger scale. According to Knight Frank, high-net-worth individuals invest around 5% of their wealth
in collectables and, thus, probably less than 1% in watches.

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returns are slightly higher (7.4% and 7.2%), but the risk (12.1% and 9.6%) does not change

compared to portfolios 1a and 1b.

Second, due to the relatively short sample period and the illiquidity of the watch market, we

consider two buy-and-hold portfolios. Again, the results are consistent with portfolios 1a and

1b, with returns of 7.3% and 7.0% and risks of 12.1% and 9.5%, respectively.

Third, we use the filtered returns instead of the raw returns. Again, the impact is negligible.

This suggests that filtering does not reduce performance potential. In addition, investors may

find it helpful to use unfiltered returns. Including an asset such as luxury watches, which

displays stale prices and therefore a low volatility, helps them reduce portfolio risk, allowing

them to invest in riskier asset classes without overly affecting portfolio risk (see Baz et al.

(2024) for a discussion).

Finally, we construct two portfolios containing the four luxury watchmakers (Hermes,

LVMH, Richemont and the Swatch Group). In this case, the returns (8.3% and 10.1%) increase,

but so do the risk (14.1% and 16.5%), the maximum drawdown (24.48% and 25.45%) and the

VaR (2.41% and 3.45%). Therefore, it does not appear that investing in listed watch

manufacturers can be a substitute or shortcut for physical watches, as the portfolio risk increases

significantly instead of decreasing.

[Insert Figure 4 here]

As a final test, we perform mean-variance spanning tests to assess whether adding watches

to an existing portfolio improves the portfolio's efficient frontier in terms of risk and return and,

thus, is attractive for portfolio diversification. Following Kan and Zhou (2012), we regress the

returns of the watch market on the returns of the existing portfolio components (equities, fixed

income, real estate and gold). If the regression alpha is zero and the sum of the betas is one,

- 15 -
then adding the new asset, in our case, watches, is not beneficial for the portfolio. In other

words, Kan and Zhou (2012) state that testing for whether alpha equals zero is equivalent to

examining if the market portfolio fully incorporates the additional asset, and testing whether

the sum of the beta coefficients equals one corresponds to assessing if the minimum variance

portfolio includes the additional asset. This approach also has three distinct advantages. First,

since the regression includes the stock market as a regressor, it refers to a traditional market

model. Second, it provides a formal test of the usefulness of including an asset in a portfolio,

and third, it allows smoothing to be taken into account, as lagged returns can be included in the

regression.

Table 5 considers the following tests: column 1 adds the overall watch index to the

benchmark portfolio. In column 2, we also add the stock returns of the four watch

manufacturers, and in column 3, we include lags on all assets to ensure that the results are not

driven by a smoothing or delayed reaction effect. Finally, columns 4 to 6 do the same for the

Rolex index.

[Insert Table 5 here]

The results are very clear. Alpha is always slightly positive, although never significant on

its own. However, the beta coefficients are always very low and close to zero. Thus, the

hypothesis that alpha equals zero and beta equals one is strongly rejected, suggesting that

adding luxury watches to a financial portfolio is beneficial in terms of diversification.

6 Conclusion

6.1 Takeaways

Academic studies of the luxury watch market are lacking despite the market's significant size

and notable evolution over the past decade. This development includes the emergence of large

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secondary markets, multiple exchange platforms, and increased interest from younger

generations. Additionally, the scarcity of watches in the primary market has led to a surge in

trading on the secondary market.

The inclusion of luxury watches in an investment portfolio offers distinctive advantages,

particularly in the context of risk management and diversification. While investing in watches

may not significantly enhance financial returns as often reported in the mainstream press, it

offers a beneficial addition to portfolio risk management strategies due to its low risk and low

correlation with traditional asset classes. This should be particularly true for buyers with greater

knowledge of and passion for this collectable. However, these diversification benefits are only

achievable through an investment in physical watches rather than through investing in stocks

of watch manufacturers.

6.2 Practical implications

Financial advisors and investors can use the distinctive attributes of luxury watches to refine

their portfolio management strategies. The low correlation of watches with traditional assets

such as equities and fixed income provides an effective tool for risk diversification, achieving

a more balanced risk profile and reducing overall portfolio volatility.

Furthermore, watches can form part of a broader alternative investment strategy. This

approach can be attractive for investors seeking to diversify their investments beyond

conventional assets. Educating investors about the benefits of including non-traditional assets

like watches in their portfolios can also enhance advisor-client relationships, demonstrating a

comprehensive understanding of diverse investment opportunities and a commitment to tailored

investment strategies.

While wristwatches may not offer high returns, they remain real assets that tend to retain

their value over time. This makes them an appropriate choice for investors seeking to preserve

their wealth. Furthermore, for many investors, watches are not merely financial assets; they are

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also items of personal interest and passion. This dual emotional and monetary value can provide

an attractive proposition for investors, and financial advisors can leverage this with their clients.

To invest successfully in watches, it is essential to have a thorough understanding of the

market. Investors and advisors should educate themselves about different brands, models and

the factors influencing watch values. Networking with other collectors and attending watch

auctions and events can prove beneficial. However, investors need to be aware of the liquidity

considerations involved. While watches can be a valuable investment, they are less readily

convertible into cash than traditional financial assets. Thus, investors should be prepared for

potentially longer holding periods and consider the difficulty of selling watches when needed.

6.3 Future work on the luxury watch market

This study is the first to examine the potential for including watches in investment portfolios.

As a result, there are numerous avenues for further research. One such area is the investigation

of the factors influencing the pricing of luxury watches, including brand reputation, scarcity,

historical significance, and market trends. This could include forecasting future price

movements and identifying factors that drive watch prices. Furthermore, it could provide insight

into the potential of watches as a hedge against inflation or geopolitical risks.

Another area for further research is the price linkage between the primary and secondary

watch markets. This underexplored area of study remains unclear in both academic and practical

terms. For instance, investigating how digital platforms, including online auctions and

marketplaces, are transforming the watch market could reveal interesting findings. It could also

assess the impact of digitalisation on market transparency, liquidity and accessibility for

investors. It would also be useful to investigate the impact of authenticity and provenance on

watch pricing. While this factor appears to significantly influence value, a more quantitative

analysis is required to determine the exact premium associated with authentic and well-

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documented watches. Furthermore, the influence of digital technologies, such as blockchain,

on the authentication and provenance of watches should be examined.

Finally, behavioural finance provides a valuable framework for analysing watch

investments. Understanding how behavioural biases, such as herding, anchoring and the

endowment effect, impact investor decisions can help explain the sometimes irrational

fluctuations in luxury watch prices on the secondary watch market. Furthermore, the impact of

social media and online communities on investment trends should be explored.

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 Figure 1
Evolution of asset classes

The figure shows the evolution of the main asset classes from January 2019 to September
2024. All numbers have been scaled to 100 at the beginning of the sample period.

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 Figure 2
Evolution of watch sub-markets

The figure shows the evolution of the different watch sub-markets from
January 2019 to September 2024. All numbers have been scaled to 100 at
the beginning of the sample period. Panel A includes four watch brands
with high returns, panel B three brands with moderate returns and panel C
six brands with low returns.

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 Figure 3
Volatility and frequency

The figure presents the volatility of the overall watch market and the different sub-markets for daily to
quarterly return frequencies. Panel A examines the overall watch market, Panel B four high-return watch
brands, Panel C three moderate-return brands and Panel D six low-return watch sub-markets.

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 Figure 4
Portfolio evolution
150.00

140.00

130.00

120.00

110.00

100.00

90.00
05.01.2019 05.01.2020 05.01.2021 05.01.2022 05.01.2023 05.01.2024

PF0 PF1a PF1b

PF0 PF1a PF1b

no watches 10% watches 30% watches
Avg. Ret. 7.4% 7.3% 6.9%
Vola 13.4% 12.1% 9.5%

The figure shows the evolution of three portfolios from January 2019
to September 2024. The first portfolio only includes equity (50.0%),
fixed income (30.0%), real estate (15.0%) and gold (5.0%). Portfolio
1a (and portfolio 1b) includes a 10.0% (30.0%) investment into the
overall watch market and diminishes the weights into the other asset
classes correspondingly. The table reports the percentage annualised
return and volatility of the three portfolios over the sample period.

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 Table 1
The watch market
Revenue in
Rank Group Brand
million CHF (est.)
1 Rolex Rolex 10'100
2 Richemont Cartier Watches 3'100
3 Swatch Omega 2'600
4 Audemars Piguet Audemars Piguet 2'350
5 Patek Philippe Patek Philippe 2'050
6 Richard Mille Richard Mille 1'540
7 Swatch Longines 1'110
8 Richemont Vacheron Constantin 1'097
9 Breitling Breitling 870
10 Swatch Tissot 825
11 Richemont IWC 726
12 LVMH Hublot 670
13 Swatch Swatch 660
14 Richemont Jaeger-LeCoultre 641
15 LVMH TAG Heuer 615
16 Hermes Hermes 593
17 Rolex Tudor 545
18 Richemont Officine Panerai 520
19 LVMH Bulgari 445
20 Chopard Chopard 420

The table presents the twenty largest watch brands by revenue in 2023. At year-end 2023, 1 CHF equalled 1.20
USD. All data are estimates from LuxeConsult and Morgan Stanley Research. Source:
https://revolutionwatch.com/morgan-stanley-luxeconsult-2024/

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 Table 2
Summary statistics
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Avg. Avg. St. Dev. St. Dev. Min. Max.
Asset Obs. Skew. Kurt.
(%) (% p.a.) (%) (% p.a.) (%) (%)
Overall market 302 0.11 5.68 0.54 3.90 -1.35 2.61 0.82 3.19
Audemars Piguet 302 0.22 11.68 1.06 7.66 -2.40 6.20 1.87 7.97
Breitling 302 0.03 1.59 1.00 7.22 -2.86 3.62 0.17 0.22
Cartier 302 0.13 6.79 1.34 9.68 -5.22 4.61 -0.11 1.78
Hublot 302 0.01 0.45 0.93 6.73 -3.70 3.29 -0.18 0.99
IWC 302 0.00 0.24 0.72 5.16 -1.71 1.85 0.09 -0.34
Jaeger LeCoultre 302 0.09 4.70 0.67 4.81 -1.62 3.31 0.34 1.55
Omega 302 0.09 4.83 0.55 4.00 -1.45 1.93 0.11 0.40
Panerai 302 -0.05 -2.64 0.68 4.94 -2.35 2.47 -0.22 0.61
Patek Philippe 302 0.21 10.92 1.14 8.25 -2.25 6.44 1.86 7.26
Rolex 302 0.13 6.94 0.68 4.94 -1.52 2.83 0.57 1.71
TAG Heuer 302 0.04 2.18 0.72 5.16 -2.68 2.04 -0.20 0.92
Tudor 302 -0.02 -1.14 0.77 5.58 -2.06 2.18 0.12 0.13
Vacheron Constantin 302 0.16 8.30 1.04 7.51 -2.12 3.95 0.94 1.60
Hermes 302 0.53 27.72 4.10 29.60 -11.90 12.89 -0.16 0.65
LVMH 302 0.38 19.62 4.36 31.44 -15.84 17.02 -0.06 1.49
Richemont 302 0.39 20.05 5.07 36.56 -18.12 22.37 0.31 2.18
Swatch Group 302 -0.06 -3.01 4.38 31.61 -18.75 11.52 -0.20 1.08
MSCI World 302 0.25 12.85 2.53 18.28 -12.45 10.98 -0.54 6.14
Gold 302 0.25 13.06 1.98 14.25 -8.22 9.42 0.09 2.47
Fixed Income Gov. 302 -0.02 -0.88 0.79 5.66 -2.30 2.97 0.31 0.93
Fixed Income Corp. 302 0.00 -0.12 1.11 8.02 -8.64 5.89 -1.88 18.92
Real Estate 302 0.06 3.18 3.14 22.63 -21.90 16.97 -0.75 13.86
The table presents summary statistics on the returns of the overall watch market and the 13 sub-markets. It also
reports the same statistics for four listed watch manufacturers and traditional financial markets. Column 1 shows
the number of observations, while columns 2 and 3 report the (annualised) return average. Columns 4 and 5 show
the (annualised) standard deviation of returns, and columns 6 and 7 show the minimum and maximum returns.
Finally, columns 8 and 9 report the skewness and kurtosis of the returns. Using weekly data, the sample period is
from January 2019 to September 2024.

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 Table 3
Original and filtered returns

The table shows the annualised return and volatility for the total watch market and the sub-markets in columns
1, 2, 7 and 8. It also shows the autocorrelation functions (ACF) with lags from one to four in the remaining
columns. Columns 1 to 8 use original raw weekly returns, while columns 7 to 12 use AR(1) filtered weekly
returns.

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 Table 4
Correlations of returns

Panel A: Correlations on the luxury watch market

[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14]
[1] Overall market 1.00
[2] Audemars Piguet 0.22 1.00
[3] Breitling 0.20 -0.13 1.00
[4] Cartier 0.15 -0.05 -0.02 1.00
[5] Hublot -0.06 -0.11 -0.03 -0.03 1.00
[6] IWC 0.22 0.03 0.01 0.04 0.01 1.00
[7] Jaeger LeCoultre 0.10 0.01 -0.08 0.04 0.09 0.00 1.00
[8] Omega 0.33 0.04 0.09 0.02 0.12 0.06 0.09 1.00
[9] Panerai 0.06 0.02 -0.13 -0.14 0.09 -0.06 0.04 0.10 1.00
[10] Patek Philippe 0.30 0.28 0.02 0.06 -0.12 0.10 0.00 0.06 0.07 1.00
[11] Rolex 0.74 0.16 0.01 0.04 -0.02 0.17 0.05 0.13 0.03 0.13 1.00
[12] TAG Heuer 0.00 0.07 0.02 0.09 -0.10 -0.02 0.08 0.04 -0.04 0.15 -0.09 1.00
[13] Tudor 0.08 0.06 0.04 -0.01 -0.11 -0.02 0.15 0.08 0.11 0.09 -0.01 0.06 1.00
[14] Vacheron Constantin 0.16 0.19 -0.12 0.06 -0.11 0.13 0.09 -0.06 0.10 0.08 0.18 0.07 0.06 1.00

Panel B: Correlations amongst asset classes

[1] [2] [3] [4] [5] [6]
[1] Overall market 1.00
[2] MSCI World 0.04 1.00
[3] Gold -0.04 0.33 1.00
[4] Fixed Income Gov. -0.09 0.03 0.36 1.00
[5] Fixed Income Corp. -0.05 0.55 0.44 0.69 1.00
[6] Real Estate 0.01 0.85 0.38 0.15 0.66 1.00

Panel C: Correlations for listed watch manufacturers

[1] [2] [3] [4] [5] [6]
[1] Overall market 1.00
[2] MSCI World 0.04 1.00
[3] Hermes 0.00 0.65 1.00
[4] LVMH 0.10 0.68 0.82 1.00
[5] Richemont 0.10 0.64 0.74 0.80 1.00
[6] Swatch Group 0.10 0.51 0.61 0.64 0.80 1.00

The table presents cross-correlations between the weekly filtered returns of the overall luxury watch market and
(i) its different sub-markets markets (Panel A), (ii) other financial asset classes (Panel B), and four listed watch
manufacturers (Panel C). The sample period is January 2019 to September 2024 and uses weekly data.

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 Table 5
Mean-variance spanning test
Overall watch market Rolex
Asset (1) (2) (3) (4) (5) (6)
Intercept 0.0004 0.0006 0.0004 0.0005 0.0006 0.0007
MSCI World 0.0669 0.0611 0.0568 0.0904 0.1369* 0.0762
Gold -0.0151 -0.0027 -0.0205 -0.0171 0.0016 -0.0166
Fixed Income Gov. -0.0826 -0.0104 -0.0455 -0.1802 -0.0502 -0.1557
Fixed Income Corp. -0.048 -0.0555 -0.0886 0.0336 -0.0491 0.0326
Real Estate -0.0239 -0.0495 0.0129 -0.049 -0.0647 -0.0287
MSCI World_lag1 -0.114 -0.0787
Gold_lag1 0.0713 0.0536
Fixed Income Gov._lag1 -0.0985 -0.0308
Fixed Income Corp._lag1 0.0806 0.0864
Real Estate_lag1 0.0499 0.0312
MSCI World_lag2 0.1119 0.0639
Gold_lag2 -0.0124 -0.0307
Fixed Income Gov._lag2 0.4071** 0.3264
Fixed Income Corp._lag2 -0.3559** -0.2975
Real Estate_lag2 0.0174 0.063
MSCI World_lag3 -0.1031 -0.1192
Gold_lag3 -0.0207 0.0343
Fixed Income Gov._lag3 -0.1078 -0.121
Fixed Income Corp._lag3 -0.0752 -0.0311
Real Estate_lag3 0.0923 0.0828
Real Estate_lag4 -0.0106 -0.1209
Gold_lag4 0.0157 0.0095
Fixed Income Gov._lag4 -0.2683 -0.4295**
Fixed Income Corp._lag4 0.2496 0.2202
Real Estate_lag4 -0.0382 0.0523
Hermes -0.1071*** -0.1291***
LVMH 0.0924** 0.1172***
Richemont 0.0072 -0.005
Swatch Group 0.0295 -0.0126
Alpha (p.a.) 1.89% 3.19% 2.22% 2.60% 3.37% 3.87%
Σ Beta -0.1027 -0.0349 -0.1940 -0.12 -0.05 -0.3281
Wald-test 105.23*** 106.9*** 40.45*** 95*** 102.56*** 36.88***

The table shows results for mean-variance spanning tests using regressions of the watch market on different assets
from January 2019 to September 2024. Columns 1 to 3 use the overall watch market, while columns 4 to 6 the
Rolex submarket as the independent variable. Columns 1 and 4 regress the watch market on traditional asset
classes; columns 2 and 5 add the returns of the four watch manufacturers, and columns 3 and 6 returns with lags
one to four for each asset. ***, **, * show significance at the 1%, 5% and 10% respectively.

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