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Herding in the non-fungible token (NFT) market

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  • Bao, Te
  • Ma, Mengzhong
  • Wen, Yonggang

Abstract

In this study, we empirically examine the existence and dynamics of herding in the burgeoning market of non-fungible tokens (NFT) with transaction-level data from November 23, 2017 to April 27, 2021. We adopt both macro- and micro-approaches to detect herding and find supportive evidence of the existence of herding in this market, the dynamics of which appears to be event-driven. A large inflow of newcomers or inexperienced investors can serve as a trigger of herding. Herding in the NFT market tends to arise when the return on Ethereum increases, but it tends to diminish as the return on Bitcoin increases. Meanwhile, unlike in traditional asset markets, herding in NFT markets does not appear to happen across submarkets (OpenSea, Atomic, Cryptokitties, Godsunchained, and Decentraland). Active investors herd to trade NFTs within different collections and follow the market consensus when they are making investment decisions on NFTs listed on OpenSea. Results from macro- and micro-approaches validate and complement one another, plotting a profile on how investors herd in the NFT market.

Suggested Citation

  • Bao, Te & Ma, Mengzhong & Wen, Yonggang, 2023. "Herding in the non-fungible token (NFT) market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).
    • Handle: RePEc:eee:beexfi:v:39:y:2023:i:c:s2214635023000515
    DOI: 10.1016/j.jbef.2023.100837
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    Cited by:

    1. Guangsheng Yu & Qin Wang & Caijun Sun & Lam Duc Nguyen & H. M. N. Dilum Bandara & Shiping Chen, 2024. "Maximizing NFT Incentives: References Make You Rich," Papers 2402.06459, arXiv.org.

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    More about this item

    Keywords

    Non-fungible tokens; NFT; Fintech; Ethereum; Blockchain; Herding behavior;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G40 - Financial Economics - - Behavioral Finance - - - General

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