The Valuation and Investment Merits of Diamonds

The Valuation and Investment Merits of Diamonds

The Valuation and Investment Merits of Diamonds

The Valuation and Investment Merits of Diamonds

Synopsis

This is the first book that deals with the economics of diamonds, specifically with the determinants of diamond prices. The period of 1978-1983 was chosen to shed light on the dramatic drop in diamond prices. Khoury clearly identifies these determinants, distinguishing them from one another by the level of impact they have on diamond prices. The book includes: a quick review of the characteristics of diamonds, the financial performance of DeBeers in a declining market, the economic structure of the diamond industry, the method for exercising economic control over the diamond market, the economic variables influencing diamond prices, and the modeling of diamond prices and the testing of the model using advanced statistical methods.

Excerpt

This book is intended to provide a rigorous analysis of the economics of the diamond market and the investment opportunities diamonds present. The dearth of analytical literature on diamonds has compelled the author to follow a new approach to studying this most peculiar of markets, one that allows for the application of advanced finance models to price diamonds and measure their absolute and relative risk.

The first three chapters are descriptive in several respects. Yet their inclusion is indispensable in order to develop a comprehensive view of diamonds and their markets. The fourth and especially the fifth chapters are much more rigorous and constitute the major contributions of the study. In Chapter 5 I conclusively show that interest rates and other commodity prices, gold in particular, are significant determinants of diamond prices and rates of return.

The price data used in the empirical analysis presented a problem, which was only partially solved. The results indicate, however, that many of the hypotheses I advanced were adequately tested and the conclusions drawn were responsible and largely conclusive.

This book should be of value to economists, finance experts, and diamond dealers and investors for it provides a comprehensive analysis of the economics of diamonds, which has thus far been ignored by the researchers in the field. The period covered in the analysis, 1978 to 1983, was chosen in order to shed light on the largest price transformation in the modern history of the diamond market. We hope the reader finds the result most instructive.

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