The Global Market for Luxury Watches and Asset Pricing

We are the first to analyze the global market for luxury watches between 2010 and 2022 through the lens of empirical asset pricing. Our watch-market index gains 0.64% per month and outperforms gold, bonds, and commodities on a risk-adjusted basis, but is no hedge or safe haven against them. We consider a comprehensive list of price- and market-related return predictors in the stock market and construct their watch counterparts. Size, Reversal, MAX and Momentum form successful long-short strategies and generate significant return differences. Momentum is inverted and driven by large returns among past losers. Our results favor mispricing related mechanisms based on the analysis of sentiment induced asymmetric pricing effects, cost of arbitrage, and covariance with stock market factors