Art as an investment

This thesis intends to evaluate how does the Chinese contemporary art performas stand-alone investment as well as in a mixed-asset portfolio. Based on Artron artist index, the weighted average method is conducted to estimate the return and risk of Chinese contemporary art investment. Additionally, optimal portfolio consisting of stock, government bond, corporate bond, gold and Chinese contemporary art is constructed using Mean-Variance Model. The results of this thesis suggest that Chinese contemporary art is worth investing. More specifically, during the period of 2003 and 2011Chinese contemporary art outperforms stock, corporate bond and government bond with return and risk taking into consideration. With lowand even negative correlation with the traditional financial investment tool, result of Mean-Variance Model suggests that Chinese contemporary art is eligible to diversify an investment portfolio as long as the expected semi-annualreturn does not exceed 9%.