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Spillover analysis on NFTs, NFT-affiliated tokens and NFT submarkets

Author

Listed:
  • Ho, Kin-Hon
  • Law, Monica
  • Hou, Yun
  • Chan, Tse-Tin

Abstract

Since the beginning of 2021, non-fungible tokens (NFTs) have been in the spotlight. Cryptocurrencies play a vital role in the NFT market because they can be used to purchase NFTs. Specifically, the native cryptocurrency associated with the corresponding NFT is called an NFT-affiliated token. One may be interested in exploring the relationship between NFTs and their associated tokens. Through spillover analysis, we found limited spillovers between these two asset classes. In addition, there are multiple submarkets within an NFT and multiple submarkets of the same type across different NFTs. We conducted spillover analyses to examine the extent of shock transmission among these submarkets. Our results show that NFTs are distinct from cryptocurrencies and their associated tokens. Furthermore, there is limited spillover between submarkets belonging to the same NFT and across different NFTs. This demonstrates that effective risk management can be achieved through diversification by adding NFT-affiliated tokens and submarkets to a non-diversified NFT portfolio.

Suggested Citation

  • Ho, Kin-Hon & Law, Monica & Hou, Yun & Chan, Tse-Tin, 2024. "Spillover analysis on NFTs, NFT-affiliated tokens and NFT submarkets," Finance Research Letters, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:finlet:v:60:y:2024:i:c:s1544612323009704
    DOI: 10.1016/j.frl.2023.104598
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    Keywords

    Cryptocurrency; Non-fungible token (NFT); NFT-affiliated token; NFT submarket; Spillover;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F3 - International Economics - - International Finance
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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