Hard Assets : The Returns on Rare Diamonds and Gems

This paper examines the investment performance of diamonds and other gems (sapphires, rubies, and emeralds) over the period 1999-2010, using a novel data set of auction transactions. Between 1999 and 2010, the annualized real USD returns for white and colored diamonds equaled 6.4% and 2.9%, respectively. Since 2003, the returns were 10.0%, 5.5%, and 6.8% for white diamonds, colored diamonds, and other gems, respectively. Both white and colored diamonds outperformed the stock market over our time frame. Nevertheless, gem returns are positively correlated with stock market returns, suggesting the existence of stock market wealth effects.