Does blue-chip art genuinely provide diversification and risk mitigation once illiquidity, transaction frictions, and survivorship bias are explicitly incorporated into performance analysis, or is the “safe haven” label fundamentally misleading?

Author

• Radhika Vissanji

Date of Award

2026

Document Type

Thesis - Open Access

Degree Name

Master of Arts (MA)

Department

Art Business

First Advisor

Lawrence Motz

Second Advisor

Noah Kupferman

Abstract

Blue-chip art is widely presented as a safe haven and portfolio diversifier, particularly during periods of financial market uncertainty. This perception is reinforced by art price indices and industry reports that emphasise long-term appreciation, relatively low volatility, and weak correlation with traditional financial assets. Despite the growing prominence of these claims in advisory and institutional discourse, there remains limited agreement on whether such properties persist once the structural characteristics of the art market are fully taken into account. This thesis evaluates whether blue-chip art genuinely delivers diversification and risk-mitigation benefits under realistic market conditions. Focusing on three structural factors, illiquidity, transaction frictions, and survivorship bias. The study constructs a rules-based blue-chip art portfolio using publicly observable auction data and analyses its performance under progressively more realistic assumptions. Returns are examined on a gross basis and then adjusted to reflect transaction costs, liquidity constraints, and survivorship effects. Volatility, drawdowns, and correlations with major financial benchmarks are reported to assess diversification claims. The analysis finds that the defensive properties commonly attributed to blue-chip art are materially overstated. Once illiquidity, transaction frictions, and survivorship bias are incorporated, apparent stability weakens and risk-adjusted performance deteriorates. Gross annualised returns of approximately 3.9 per cent for the blue-chip portfolio are reduced to negative 1.8 per cent on a fully adjusted basis, representing a gap of 5.7 percentage points between headline and implementable performance. The thesis concludes that blue-chip art’s reputation as a safe asset is driven less by inherent market behaviour than by the construction and communication of performance data. As a result, blue-chip art may function less as a robust portfolio stabiliser and more as a portfolio trap, appearing resilient in theory while offering weaker diversification benefits in practice.

Recommended Citation

Vissanji, Radhika, "Does blue-chip art genuinely provide diversification and risk mitigation once illiquidity, transaction frictions, and survivorship bias are explicitly incorporated into performance analysis, or is the “safe haven” label fundamentally misleading?" (2026). MA Theses. 296.
https://digitalcommons.sia.edu/stu_theses/296