Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 662

Do investors accept lower returns from assets that make them feel good?

It is easy to think about the merits of any asset class as based entirely on its financial return prospects, but what if an asset provides a different benefit – what if it makes us feel good? Are we then happy to accept a lower financial return? A forthcoming paper by Elroy Dimson, Kuntara Pukthuanthong and Blair Vorsatz seeks to answer this question by appraising the investment performance of collectibles such as classic cars, art, wine and stamps. They find evidence of lower financial returns for assets with a positive emotional value. This has broader implications for our investors than simply the world of violins and carpets.

The limitations around the data on collectibles means the methodology applied for the study is complex – it is not straightforward to calculate a Sharpe ratio for English 18th century furniture – but I will describe the approach in simple terms. The researchers compared the returns of 13 collectible asset class categories over up to 110 years to a risk-appropriate portfolio of liquid securities. They were seeking to answer the question – how does the performance of collectibles compare to traditional, liquid market portfolios of equivalent risk?*

And the answer was that the collectibles underperformed by an average of 2.5% per annum. The researchers contend that while the liquid asset portfolio has only a financial return element, the collectibles have a non-financial return – what they call an ‘emotional yield’ – which is the reason for the performance gap.

What the authors define as an emotional yield is some emotional benefit that is derived from owning the asset. They define this as private enjoyment and social signalling. If I own a valuable painting, there is some utility from the fact that I enjoy looking at it, and from what other people think it says about me that I own it.

If an asset brings us some form of pleasure or enjoyment, then we require a lower financial return from holding it.

Although the methodology underpinning the paper is complex and necessarily imperfect, the idea that the emotional impact of an asset has an influence on its returns is a compelling one. How we feel has a huge impact on our decision making and judgement, but is incredibly difficult to either acknowledge or measure. It seems perfectly aligned with human behaviour – and indeed rational – that if we have two assets, one in which owning it makes us feel good and one where ownership generates no emotional benefit, we will be content with a lower financial return from the one which is more affecting.**

One unanswered question is the extent to which investors know that they are receiving a lower return. With assets such as collectibles, deriving high quality returns data is inevitably difficult, and there is no reasonable way for anyone to compare performance to a ‘risk equivalent’ portfolio of liquid assets. It would be interesting to explore whether investors would be willing to explicitly make this type of trade-off.

The wider implications of emotional yield

While the paper focuses on the world of collectibles, the notion that the presence of an emotional yield impacts our required return has potentially broader ramifications. The authors touch upon – but do not explore in detail – the potential for the concept to be meaningful for ESG investors. If we believe our investments are doing good, that makes us feel good, and therefore we benefit from a positive emotional yield and may accept lower returns.

This seems plausible although the level of emotional yield we might derive from holding an asset, must be related to the strength of emotions elicited. For tangible assets – such as jewellery or coins – this can be incredibly strong, as we have full ownership and can hold, see and feel an object. Information about partial ownership of a company and the ESG-related activities it is undertaking is far less salient. To generate an emotional yield, investors need to be made to feel something.

We have discussed only the potential for a positive emotional yield, but what about the opposite situation? Do investors require a higher return for assets that take an emotional toll? Those that make us feel bad for owning them. As with ESG, it is fair to question the emotion that can be generated by simply owning stocks and bonds which can often feel abstract. Even taking this into account, however, it would seem reasonable that we want to be compensated for holding assets that make us feel discomfort or some level of guilt. It is perhaps an idea that can be applied to value investing more generally given the negative sentiment that is likely to surround anything falling into that categorisation.***

One other important implication that the authors highlight about the impact of the existence of an emotional yield – on collectibles in particular – is the potential limitations of tokenisation. By their analysis investors owning collectibles achieve a lower return which is offset by the positive emotional impact of full ownership. If a collectible is tokenised and ownership is fractional, an investor bears the cost of the lower financial return, but without the emotional yield. I don’t get to enjoy the painting hanging on my wall, but I might well pay for it.

 

* There is a lot of complexity in the methodology which might not make for enjoyable reading in a 1000-word blog post. Please do read the full paper for details.
** When I refer to emotion here, I am talking specially about how holding the asset makes us feel, not the emotions that price fluctuations might provoke. 
*** In a way, we can think of the higher returns required for owning more volatile assets being a form of emotional yield. We want recompense for the stress and anxiety of ownership.

 

Joe Wiggins is Director of Research at UK wealth manager, St James’s Place and publisher of investment insights through a behavioural science lens at www.behaviouralinvestment.com. His book The Intelligent Fund Investor explores the beliefs and behaviours that lead investors astray, and shows how we can make better decisions.

This article was originally published on Joe’s website, Behavioural Investment, and is reproduced with permission.

 

  •   13 May 2026
  •      
  •   

 

Leave a Comment:

RELATED ARTICLES

Where to put your money these days

The perfect portfolio for the next decade

The dawn of wicked asset classes

banner

Most viewed in recent weeks

Testamentary trusts post-budget: Estate planning, tax reform and the ‘death tax’ debate

Proposed Budget changes to taxation are casting new uncertainty over testamentary trusts, prompting closer scrutiny of estate planning structures and the real implications of reforms still taking shape.

How to minimise tax with a will

Inheritance tax implications in Australia may surprise some, as poor estate planning without proper wills or trusts can lead to costly tax bills and delays for beneficiaries.

High quality businesses are on sale

Beneath the dominance of the ASX's largest stocks, much of the market has been left behind. High-quality companies are now trading at levels rarely seen, offering opportunities for investors willing to look deeper.

Meg on SMSFs: The CGT changes don’t impact super but what about Div 296 tax decisions?

New CGT rules could tip the scales in the super vs non-super debate. For those facing the Division 296 tax, the case for withdrawing has gotten more complex. A "comparison rate" tool may help assess decisions.

The strange effect of the 30% minimum capital gains tax

The 30% minimum tax on capital gains sits at the heart of the budget's proposed reforms. Yet the mechanics reveal anomalies that introduce unexpected distortions that raise questions about its design.

Welcome to Firstlinks Edition 667 with weekend update

The downfall of the giant and three lessons for investors.

  • 18 June 2026

Latest Updates

Latest from Morningstar

Ranking three common retirement strategies

The defining challenge of retirement isn't just about building wealth, it's about converting your lifetime savings into sustainable income. A holistic understanding of different strategies can improve long-term outcomes.

Economy

Was life really better in the good old days?

Are we worse off than previous generations? Lately, there seems to be a heightened level of angst that economic conditions are getting harder and that the two-party political system (and maybe democracy too) is failing voters.

Retirement

Australia has saved $4.5 trillion for retirement. Here's what matters more

Most Australians approaching retirement can tell you the exact dollar value of their super account. But success depends on more than a sizeable balance. Here's four key questions to ask yourself at the start of the financial year. 

Who gains in an AI-supercharged economy?

AI is already reshaping the economy, but companies building transformative technologies rarely capture the greatest long-term value. Instead, those benefits accrue to the users. We may well see this pattern reproduced. 

Taxation

Div 296's million-dollar reset worth $25,000

The 'cost base reset' for the new super tax is being sold as protection for pre-July gains. A worked example shows $1M of protection is worth about $25,000, and the real deadline has not passed.

Latest from Morningstar

The forecasting fix that Wall Street missed

Asking whether markets are overpriced may be the wrong question. New research suggests that traditional valuation metrics used to forecast returns may have been misread. Here are five takeaways for investors.

Investment strategies

Should a fund manager invest their own money differently?

Investors often like the idea that fund managers should invest client money exactly as they invest their own. But reality is more complicated. Unique circumstances make a different approach rational and, at times, beneficial.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.