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Examining the bidirectional ripple effects in the NFT markets: Risky center or hedging center?

Author

Listed:
  • Zhang, Xu
  • Naeem, Muhammad Abubakr
  • Du, Yuting
  • Rauf, Abdul

Abstract

This study introduces a novel bidirectional ripple effect method to identify the risky center, hedging center, and duration of ripple effects. This method is used to examine the static and dynamic ripple effects among NFTs using idiosyncratic volatility measures. The findings indicate that, overall, correlations and bidirectional ripple effects among NFTs are prominent over the sample period. Only a few NFTs are significant ripple centers. Decentraland is a significant risky center, while CryptoVoxels serves as a reliable hedging center. The outcomes of rolling window tests and durations reveal that the central role of NFTs varies over time. The findings also show that ripple effects have significant durations. These conclusions hold considerable importance for NFT investors in making investment choices and managing risks.

Suggested Citation

  • Zhang, Xu & Naeem, Muhammad Abubakr & Du, Yuting & Rauf, Abdul, 2024. "Examining the bidirectional ripple effects in the NFT markets: Risky center or hedging center?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 41(C).
    • Handle: RePEc:eee:beexfi:v:41:y:2024:i:c:s2214635024000194
    DOI: 10.1016/j.jbef.2024.100904
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    More about this item

    Keywords

    NFT; Bidirectional ripple effect; Risky center; Hedging center; Duration;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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