©Risk Concern. All Rights Reserved.
Our luxury watch price index tracks the price of the 7 most demanded watches in the market, in an unworn condition that are sold with boxes and papers. The prices used in the index are the average market sale price for the period mentioned to ensure the highest level of accuracy:
Compared with the rate of inflation:
This index can be used to assess the performance of, arguably, the most in-demand watches to assess how the prices fluctuate over time. This performance is compared with the rate of inflation, and our section on luxury goods includes further analysis of the fluctuations in watch prices and compares it to various other assets, assessing the risk of this investment 'asset' as well.
Individual watch owners can assess the performance of their timepieces' price in relation to this index to assess whether the timepieces they hold have performed better or worse than this index –j a calculation of their investments alpha, essentially (alpha, fundamentally, is the return in excess of the market proxy; for example, a stockholder's portfolio of stocks may have increased in value by 15%; if in the same period the S&P 500 index, an index used as the market proxy, or market index, increases by 10%, the investors alpha will stand at 5%).
Similarly, if an individual holds a timepiece, let's call it watch ABC, and its price increases by, say, 20% in the quarter, and our watch price index increases by 15% in the quarter, the watch owners' alpha on investment in the timepiece would be 5%. Thus, this index gives the investor/watch owners a way to evaluate the fluctuations in the price of the most demanded watches and compare it against her timepiece or portfolio of timepieces overall.
What components are included in the index?
While the components, the most in-demand watches by period may change, just as companies included in the S&P 500 change, currently the following items are included in the index:
How is the index calculated?
· MP$ is the market price of each timepiece in the index on the date of calculation.
· CW is the current weight given to each timepiece, and
· TC is the total number of timepieces in the index
Simplistically, it can be stated that the index calculates an overall value based on the price of watches included in it; which watches are included is determined by the demand of the top watches as experienced in the market. A weight is assigned to each item included, based on the overall number of items included in the index.
Performance of constituents in aggregate
Overall, since 2015, the index has had a quarterly growth rate (geometric mean) of 5.5%, or a very impressive 22% p.a., with the most impressive growth rate being that of Patek Philippe nautilus 5711 (6.4% appreciation per quarter), followed by AP's Royal Oak Jumbo (6.3%). The worst performing constituents in the index have been the Omega Seamaster (2.5% appreciation), followed by Rolex "Batman" (2.9% appreciation).
For an in-depth report on risks associated with investing in timepieces and how much money can be lost or gained by such an allocation, see our report.