WatchCharts Market Ratings are measurements of a watch’s performance relative to the overall secondary watch market. Each rating is represented on a scale of 0-99.
For each watch that we track, we provide four market ratings: Overall Rating, Growth Rating, Liquidity Rating, and Predictability Rating.
The Growth, Liquidity, and Predictability ratings indicate the relative performance of the watch in each respective category. A more detailed explanation of how each category is measured is provided below. The Overall Rating provides a combined score for the watch based on the Growth, Liquidity, and Predictability ratings.
Each Market Rating indicates if the watch is outperforming, aligned with, or underperforming the secondary watch market overall, or with respect to the specific category. It is entirely data driven and serves as a quick indication of how “hot” a watch is compared to the market at large.
Also note that our Market Ratings are not a predictor of how the watch will perform in the future, but instead measures how it is performing currently.
Each WatchCharts Market Rating is represented on a scale of 0-99. This number is the percentile that the watch model scored in the specific category. For example, a rating of 50 indicates that the watch performs better than 50% of the watches for which we track market ratings, while a rating of 80 indicates that the watch performs better than 80% of the watches for which we track market ratings.
Ratings above 50 are assigned to watches that perform better than the market at large in the specific rating category, or overall. Ratings below 50 are assigned to watches that perform worse than the market at large in the specific rating category, or overall.
In developing our Market Ratings, we’ve identified three key attributes which are strong indicators for a watch’s performance on the secondary market. They are growth, liquidity, and predictability.
An explanation of each attribute, as well as the details of how we determine each corresponding rating, are provided in the sections below.
Growth is defined as the change in a watch’s secondary market value. It is readily apparent that watches increase in value over time are more desirable, and have better prospects of continuing to hold or increase in value in the future. This is perhaps the most important factor if you are considering to buy a watch as an investment.
The Growth Rating is the percentile that the watch model scored with respect to the growth of the watch’s value on the secondary market. The growth of a watch is measured by the AAGR (average annual growth rate), defined as the average increase in the value of the watch over the past year. It is calculated by performing regression analysis on the historical prices of the watch.
If we were to rank the AAGR of all the watches for which we track ratings, a Growth Rating of 50 would indicate that the watch has a higher AAGR than half of all the watches, while a growth rating of 80 would indicate that the watch outperforms 80% of all watches.
Liquidity is defined as how easily a watch can be sold (or converted to cash). This aspect of financial performance is one that is relatively unique to the watch market, as liquidity is not a significant concern with traditional investments. Watches with high liquidity can be bought or sold easily, with each individual sale have little to no impact on price. Thus, their value is easier to track and predict.
On the other hand, watches that are illiquid are difficult to sell. In such cases, each individual sale may also have a significant impact on the market price. This may be a good thing when you are in possession of a rare asset for which there is high demand, but in other circumstances it may prove difficult to sell your watch at fair market value due to the difficulty in finding a buyer, or within a reasonable time span.
When it comes to our market analysis, we rely on a healthy volume of trade activity to determine a consistent and reasonable average price for each watch. As such, we rank watches with high liquidity better than those with low liquidity.
The Liquidity Rating is the percentile that the watch model scored with respect to the watch’s liquidity on the secondary market. We use two factors to determine liquidity: Days on Market (DoM) and Sales Volume.
Days on Market is defined as the number of days a watch remains on the market before it is sold. A watch with lower average DoM has higher liquidity, as it indicates that there are more buyers ready and willing to purchase the watch.
Sales Volume is defined as the number of transactions for the watch. A watch with higher sales volume has higher liquidity, as it indicates that there are a healthy number of buyers and sellers for the watch.
Predictability is defined as the consistency of growth for a watch. We consider a watch with a more consistent rate of growth to perform better than watch which has high price volatility. While past performance is no guarantee of future results, it is our expectation that as a whole, watches with a predictable rate of growth will outperform watches with more volatile pieces over the long term.
The Predictability Rating is the percentile that the watch model scored with respect to the watch’s predictability on the secondary market.
How do we measure predictability? In the above section covering the Growth Rating, we explained that growth is measured using AAGR, calculated by performing regression analysis on the past one year of historical data.
Expanding on this, predictability is measured by the root-mean-square error (RMSE) of the AAGR. Simply put, RMSE measures the difference between the the price trend estimated by the regression and the actual historical prices. RMSE is always non-negative, and a value of 0 would indicate a perfect fit between the regression model and the actual data – meaning the data is perfectly predictable (this almost never happens in practice).
In order to compare the RMSE of different watches, we use the normalized root-mean-square error (NRMSE) to calculate the Predictability Rating, which is defined as the RMSE divided by the difference between the min and max price within the past year.
Thus, we can summarize by saying that predictability is measured by the NRMSE of the AAGR.
A watch’s Overall Rating is determined using a combination of the Growth, Liquidity, and Predictability Ratings. The weight of each rating is as follows:
As such, the Overall Rating is the percentile that the watch model scored in the combined Growth, Predictability, and Liquidity Ratings, using the aforementioned weightings.
In order for watch to be receive Market Ratings, three conditions must be met: