LONDON: Violins can offer investors a stable long-term return in a diversified portfolio, plus an unusual dividend — enjoyment, economic researchers say.

Investment in violins gives a long-term return after inflation of around 3-4 per cent, according to the Centre for Economic Policy Research (CEPR), which is funded by organisations including the Bank of England.

“While this return is lower than other standard investments, the price path has been stable,” a CEPR paper said.

Its researchers also found that while the overall return for violins is often lower than for other assets, it tends to improve when stocks and bonds are weak, and vice versa.

“They have a slightly negative correlation to stocks and bonds, making them a candidate for inclusion in a diversified portfolio based on past performance, and they have had a relatively low variance in returns,” the paper said.

A bonus is that violin owners can earn social dividends — as opposed to, say, cash dividends for stocks.

“Investing in violins ... can provide the investor with prestige and a ticket into a social world of musicians or artists and other investors,” it said.

CEPR calculated that over the period 1980-2006, violins gave a real return — after allowing for inflation — of 3.97 per cent.

That compared with 9.18 per cent on the US S&P 500 stock index, 6.63 per cent on US Treasury bonds and 7.74 per cent on works of art.

Over the longer term of 1850-2006, however, violins gave a real return of 3.3 per cent, beating US Treasury bonds which yielded only 2.19 per cent.

CEPR cautions that the return on violins is hard to measure because the finest instruments don’t change hands very often and when they do, dealers often accept “trade-ins” — swapping the instrument for one of similar or higher value.

CEPR researchers studied two sets of sales data: one covering a select group of 68 instruments from revered Italian makers such as Stradivari and del Gesu, including an instrument made in 1610 by Giovanni Paolo Maggini; the other spanning four centuries and more than 100 violin makers.

Previous studies gave widely varying results. A study of repeat sales of 17 Stradivaris between 1803 and 1982 found real returns averaged about 2 per cent. Another study by a German publication showed Italian violins increased on average 11.7 per cent per year in price between 1960-1996.—Reuters