Wine and Art Investments Lag the Market by 2.6% a Year — The Hidden Price of “Emotional Returns”

Collectors have long justified buying fine wine, paintings, violins, or rare stamps with a simple argument: these assets are a hedge against the stock market, a store of beauty, and a source of personal pleasure.

New academic research shows the truth is more expensive than most realize.

A major study published in the Financial Analysts Journal (and available on SSRN) finds that collectible assets deliver an average “emotional yield” of 2.64% per year — the portion of potential financial return that investors willingly sacrifice for the joy, status, and personal satisfaction of ownership.

In plain English: over the long run, wine and art portfolios trail equivalent-risk financial portfolios by roughly 2.6 percentage points annually simply because owners enjoy owning them.

How Researchers Measured the “Pleasure Premium”

The team — led by Professor Elroy Dimson of Cambridge Judge Business School — developed a clever method to isolate the emotional component:

1. They built “imitation portfolios” from 57 stock and bond indices across 18 countries.
2. They identified the key risk factors driving those indices.
3. For each collectible (wine, art, stamps, classic cars, etc.), they calculated its sensitivity (beta) to those same factors.
4. They then constructed a purely financial portfolio with identical risk exposure — but zero emotional payoff.
5. The gap between the imitation portfolio’s return and the actual collectible’s return = the emotional yield (the discount investors accept for pleasure).

This approach allowed them to compare apples to apples: same risk profile, different ownership experience.

The Numbers: Long-Term vs. Modern Era

1901–2007 (long-term period)
Average emotional yield across collectibles: 2.64% per year.  

Highest “pleasure taxes” were paid on:

• Violins: 2.26%;
• British art: 2.01%;
• British stamps: 1.82%;
• Wine: 0.86%.

Some categories actually outperformed their imitation portfolios in this period, partly because many collectibles indices only include “survivors” whose prices rose over time.

1998–2018 (modern period)

Here the researchers split collectibles into three groups based on how owners actually use them:

• Private assets (used at home — 18th-century English furniture, rugs): 9.55% emotional yield — the most expensive pleasure.
• Public/status assets (displayed for prestige — fine art, diamonds): 2.28%.
• Specialist assets (appreciated mainly by experts — wine, stamps, coins, classic cars): 0.45%.

Wine and painting fall squarely into the public and specialist categories, meaning their owners are consistently giving up 0.5–2.3% of annual return for the emotional upside.

Importantly, these figures understate the true cost: researchers did not factor in storage fees, insurance, illiquidity, or volatility. Real-world emotional yields are even higher.

Why Fractional Ownership Platforms Lose Money for Investors

Platforms like Masterworks (art) or Rally (collectibles) let people buy shares in a Picasso or a case of rare Bordeaux without ever touching the physical object.

According to the study, this model is structurally unattractive.  
When the asset sits in a warehouse or vault, investors lose all of the emotional yield — yet they still suffer the lower financial returns of the collectible itself. They get the worst of both worlds: reduced returns with zero pleasure.

The researchers suggest a simple fix: rent the artwork or wine to museums, corporations, or high-end events and distribute the rental income to fractional owners. Even modest rentals on mid-tier pieces ($3,800–$50,000) could generate 6–30% annual returns on top of any price appreciation.

A Warning for the ESG Crowd

The authors see a broader application. They argue that ESG (environmental, social, governance) investments likely suffer from the same phenomenon: investors accept lower financial returns in exchange for moral or ideological satisfaction — another form of “emotional yield.”

The methodology developed here could finally put a number on exactly how much that moral satisfaction costs.

Also read:

Bottom Line

Wine, art, and other passion investments are not broken — they simply deliver two kinds of return: financial and emotional. The market only prices the first one. The second one you pay for out of your own pocket, year after year.

If you buy a painting because you love looking at it every day, that 2.6% annual “emotional tax” is probably worth it.  
If you’re buying it purely as a financial diversifier, you may be better off in the imitation portfolio — the one that doesn’t require a climate-controlled cellar or a spot on your living-room wall.