Risk and Return in an Electronic Market: An Examination of Investments in Online Rare Coin Auctions Over a Short Horizon

Collectables are often considered as an alternative to stocks for investing. Technological advancements have facilitated collectible investment, allowing information to be transferred worldwide between millions of investors in electronic markets such as online auctions. This research examines the behaviors of these electronic market investors, especially as they compare to traditional stock market investors. This research examines risk and returns in 13,263 auctions involving 755 distinct rare coins collected over 128 days. While stock investors typically ignore risk that can be eliminated through diversification, this research finds evidence that collectible investors who trade in online auctions do not consider diversification over short horizons, but rather they their bid levels include diversifiable risk adjustments, supporting a contention that typical online auction collectible investors view collectibles as stand-alone assets, differing from typical the stock investor’s perspective that diversifiable risk can be ignored when an investment is added to a collection or portfolio. RISQUES ET BÉNÉFICES SUR UN MARCHÉ ÉLECTRONIQUE: ÉTUDE DES INVESTISSEMENTS DANS LES SITES D'ENCHÈRES NUMISMATIQUES À UN HORIZON DE COURT TERME Les progrès technologiques ont facilité les investissements dans les articles de collection en permettant à des millions d’investisseurs d’échanger des informations à travers des marchés électroniques telles que les enchères en ligne. Cette recherche examine les risques et les rendements lors de 13 263 enchères de 755 pièces rares, observées sur 128 jours.