Chartered Alternative Investment Analyst Association (CAIA) Practice Exam

What is the median real return on holding art over extended periods of time?

1. 1.5%

2. 2.2%

3. 3.0%

4. 5.0%

The correct answer is: 2.2%

The median real return on holding art over extended periods of time is 2.2%. This figure represents the average return investors can expect from art when adjusted for inflation, reflecting the asset's long-term performance in terms of purchasing power. Art as an investment is often valued not only for its aesthetic appeal but also for its potential to appreciate over time. However, the real returns can vary significantly based on market conditions, the specific pieces of art acquired, and the time frame of the investment. A median return value of 2.2% indicates that while art can be a viable alternative investment, it generally offers modest returns compared to other asset classes, especially when considering the illiquidity and unique risks involved in art investments. Understanding this median return teaches investors about the long-term performance expectations for art, helping them to contextualize it within their broader investment portfolio. This information is beneficial for those considering diversifying into art, providing a realistic framework regarding its historical value growth relative to inflation.