Exploring the Nexus of virtual and real-world assets: Price co-movement and risk spillovers in the metaverse era

With the rapid development of the digital economy, the rise of the metaverse and Web3 technologies has created new modes of online interaction and economic systems. This study first employs rolling window wavelet correlation analysis to examine the co-movement between real-world metaverse assets and the prices of cryptocurrencies and NFTs. Subsequently, wavelet coherence analysis is applied to further test the robustness of the results. Finally, the Time-Varying Parameter Vector Autoregression (TVP-VAR) model is utilized to investigate the time-varying risk transmission relationships among cryptocurrencies, NFTs, and real-world metaverse assets.The results indicate that cryptocurrencies exhibit a significant positive correlation with the prices of real-world metaverse assets across all time frequencies, with stronger correlations observed before 2024 that gradually weaken after early 2024. NFTs within the metaverse module show co-movement with real-world metaverse asset prices at long-term frequencies, while NFTs from other modules are decoupled from real-world metaverse asset prices. Moreover, real-world metaverse assets act as net risk receivers within the system, maintaining a close risk transmission relationship with cryptocurrencies, which weakens after early 2024. In contrast, the risk transmission relationship between real-world metaverse assets and the NFT market is relatively weak. Our findings reveal the complex interrelationships between virtual tokens and real financial markets in the early stages of the metaverse concept, providing references for investors and policymakers.