From the paper:
Investigating the potential of investing in fine stringed instruments as an alternative investment asset. Angela ORTIZ MUÑOZ, 2020. PhD Thesis
A helpful reference
TL;DR:
Violins are a real, if niche, alternative asset — not just a passion hobby. They offer ~3.5–5% real annual returns with genuinely low correlation to financial markets, meaning they earn their place in a diversified portfolio at a modest (~10%) allocation. The two most striking findings are that maker identity dominates everything else in price formation (Stradivari/del Gesù = +333% value impact), and that which musician plays an instrument functions like a credit rating upgrade, creating measurable abnormal returns. The market survived 2008 without a downturn, which is rare for any asset class.
Something I learnt (summarized by Claude)
The Violin Market
The global rare violin market (instruments 150+ years old, by the top ~270 makers) is estimated at ~$16.2 billion. For context, the global art market is about 67.4 billion. Asset-secured lending against violins reached ~50 million in outstanding loans by 2019.
Supply is tiny and shrinking. Only about 2,465 surviving instruments exist from the top 11 old Italian makers — 650 Stradivari, 165 Guarneri del Gesù, 300 Guadagnini, etc. Instruments leave circulation permanently through museum acquisitions, destruction, and loss. Unlike art, nothing contemporary will ever displace old masters here — the cooler climate 300 years ago produced denser, more resonant wood that cannot be replicated.
How the Market Trades
Two channels exist: public auctions and private dealers. Auctions account for only an estimated 10–20% of all transactions; the rest is private. Key auction houses today are Tarisio, Ingles & Hayday, Bromptons, and Vichy (historically Sotheby’s, Christie’s, Bonham’s). London, New York, and Paris dominate geographically (~25% each for the first two).
The market is profoundly illiquid. The average holding period is 32 years (19 years for top makers). An investor needs to hold a violin for at least 4 years just to break even after costs.
Transaction Costs
This is the market’s biggest practical drag. Auction houses charge 20–25% round-trip commission. Private dealers charge roughly 5–10%. Tarisio, for instance, offers buy-back at ~75% of catalogue value. The long holding periods partly offset these costs on an annualized basis — with a 40-year hold, the net yearly return on top violins is ~6.2%.
What Drives Value
The hedonic regression identifies these price determinants (ranked by impact):
- Maker is overwhelmingly dominant — being a top maker (Stradivari, del Gesù, Guarnieri) adds +333% to value.
- Tarisio auction house effect: +85% (reputational premium of the leading specialist house).
- Varnish (the deep red Strad color as a proxy for wood/sound quality): +81%.
- Instrument age (≥200 years, proxy for scarcity): +67%.
- Top auction house (Sotheby’s/Christie’s): +46%.
- Authenticity certification: +29%.
- Body length (standard Strad LOB): +20%.
- Auction season is statistically insignificant.
Two additional effects are documented: a “masterpiece effect” (Stradivari and del Gesù consistently outperform, especially in private sales) and a “musician effect” (violins played by renowned musicians carry a measurable price premium — a musician’s adoption acts like a ratings upgrade, pushing prices further).
Returns & Risk
Nominal annual returns run 3.7–6.9% (violin index vs. Stradivari index), or roughly 3.6–5.0% after unsmoothing for illiquidity bias. Real returns: ~3.6% for violins broadly, ~5.0% for Stradivaris. The raw index understates true volatility — once corrected for appraisal smoothing, annual standard deviation jumps from ~8.6% to ~19.7% (violins) and from ~17.2% to ~28% (Stradivaris).
Portfolio Properties
Violins have very low correlation with equities, bonds, REITs, and commodities — making them a genuine diversifier. After unsmoothing, they show slight negative correlation with bonds and real estate, and slight positive correlation with commodities and art. The equity beta is low (~0.2–0.3 with lagged adjustments), consistent with the observation that violin prices kept rising through the 2008 financial crisis. Optimal portfolio allocation is roughly 10% (after accounting for true volatility), down from 20%+ if you naively use the smoothed data. Violins also show partial inflation-hedging ability.
Key Structural Properties
Costs of ownership include insurance (0.5–2% of value annually) and maintenance, typically borne by the musician-borrower. There is no dividend or yield. Information asymmetry is severe, especially at the low end. Auction anomalies (declining price effect, anchoring to pre-sale estimates, winner’s curse) are all present. Media coverage and emerging-market demand (Russia, China, Korea) have been accelerating price growth. The funding model often involves syndicated purchases with the instrument lent to a performer — essentially, the musician is the jockey, the violin is the horse.
Potential future directions
It would be interesting to formalize the microfoundation of the market. The violin-as-investment model is essentially: buy instrument → lend to musician → musician bears costs and adds provenance value → sell later. This is structurally similar to aircraft leasing or even thoroughbred horse syndication. A rigorous study of the economics of this lending arrangement — implied rental yields, musician default/damage risk, contract structures — would be genuinely novel.