LEGO – The Toy of Smart Investors

Victoria Dobrynskaya, Julia Kishilova

Research

27 Pages

The authors explore LEGO sets as an unconventional investment, analyzing their return profile, risk exposure, and diversification potential within a broader portfolio context. The paper finds LEGO delivered ~11% annual returns since 1987, outperforming traditional assets, with some sets exceeding 600% annually, challenging assumptions about what qualifies as a serious investment.

Key Takeaways

Strong Historical Returns: LEGO sets generated ~11% annual returns from 1987–2015, with a cross-sectional average of 18.5% and extreme cases reaching 600% per year.
Low Market Correlation: Returns show near-zero exposure to market, value, and momentum factors, with a 4–5% alpha and 0.4 Sharpe ratio enhancing diversification potential.
Wide Dispersion Outcomes: Individual set returns ranged from -50% to +600%, with top performers exceeding 1,000% over 8–10 years depending on theme and rarity.
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