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Connectedness and portfolio hedging between NFTs segments, American stocks and cryptocurrencies Nexus

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  • BenMabrouk, Houda
  • Sassi, Syrine
  • Soltane, Feriel
  • Abid, Ilyes

Abstract

The paper examines the dynamic spillover and hedging effectiveness between five main segments of NFTs, which are Collectibles, Art, Game, Metaverse, and Utility, and the other asset classes namely Bitcoin and the American Stocks (S&P500). The study sample covers the period from April 27, 2018 to September 15, 2022. Using a Time-Varying connectedness approach through the TVP-VAR model and inspired by the Diebold and Yilmaz spillover index, the results show weak dynamic return spillovers between NFTs and the other assets, indicating that these new digital assets are still relatively decoupled from traditional asset and Bitcoin. We find also that Bitcoin is a major transmitter of spillover whereas Collectibles, Utility and S&P500 are net recipients of spillovers. Using the DCC-GARCH model, we extract the optimal weights, hedge ratios, and hedging effectiveness for the pairwise portfolios composed of S&P500/NFTs and Bitcoin/NFTs. The results indicate that investors and portfolio managers should consider adding NFTs in their portfolios of either S&P500 or Bitcoin to achieve diversification benefits. Finally, for Robustness Checks, we forecast the performance of the hedged versus the unhedged portfolios using the Long Short-Term Memory (LSTM) networks. Our findings confirm almost the results of the hedging effectiveness of NFTs and stem for the superiority of metaverse among these assets to serve as a perfect hedge.

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  • BenMabrouk, Houda & Sassi, Syrine & Soltane, Feriel & Abid, Ilyes, 2024. "Connectedness and portfolio hedging between NFTs segments, American stocks and cryptocurrencies Nexus," International Review of Financial Analysis, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:finana:v:91:y:2024:i:c:s1057521923004751
    DOI: 10.1016/j.irfa.2023.102959
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    10. Assaf, Ata & Demir, Ender & Mokni, Khaled, 2024. "Exploring connectedness among cryptocurrency, technology communication, and FinTech through dynamic and fractal analysis," Finance Research Letters, Elsevier, vol. 63(C).
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    13. Qadeer, Abdul & Hunjra, Ahmed Imran & Sami, Mina & De Moor, Lieven, 2025. "Portfolio investment analysis and asymmetric shock transmission among green investment, fixed income, and commodity markets," The Journal of Economic Asymmetries, Elsevier, vol. 32(C).
    14. Ullah, Aziz & Biao, He & Sarwar, Suleman & Wu, Zhongshu, 2025. "Transmission of oil price risk to airline stock returns: Evidence from China and the United States," Research in Transportation Economics, Elsevier, vol. 110(C).
    15. Umar, Muhammad & Qin, Meng & Su, Chi-Wei, 2025. "Exploring the hedging performance of non-fungible token: Novel evidence from world uncertainty," Research in International Business and Finance, Elsevier, vol. 77(PA).
    16. Emiliya James & Parthajit Kayal & Moinak Maiti & G. Balasubramanian, 2024. "A Study on the Hedging and Safe-Haven Features of Non-fungible Tokens Segments," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 23(4), pages 495-502, December.
    17. Ghosh, Indranil & Alfaro-Cortés, Esteban & Gámez, Matías & García-Rubio, Noelia, 2024. "Reflections of public perception of Russia-Ukraine conflict and Metaverse on the financial outlook of Metaverse coins: Fresh evidence from Reddit sentiment analysis," International Review of Financial Analysis, Elsevier, vol. 93(C).
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    19. Patel, Ritesh & Kumar, Sanjeev & Agnihotri, Shalini, 2025. "Unveiling the crypto-green nexus: A risk management and investment strategy approach through the lens of NFTs, DeFis, green cryptocurrencies, and green investments," The North American Journal of Economics and Finance, Elsevier, vol. 75(PA).
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    21. Yan, Xianglin & Piao, Longguo, 2025. "The effect of global geopolitical risks on trade openness," International Review of Economics & Finance, Elsevier, vol. 102(C).

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