Bridging Traditional and Digital Assets: An Entropy Analysis of Real Estate Tokens and Financial Market Dynamics

Seyedeh Fatemeh Mottaghi and Bertram Steininger

ERES from European Real Estate Society (ERES)

Abstract: The integration of blockchain-based real world assets like real estate tokens into traditional and digital financial markets has introduced new dynamics in information transmission, and inter-markets connectedness. In this paper, we apply entropy measures to to analyze the directional flow of information between digital world assets indices (like real estate tokens and S&P Ethereum), traditional real estate investment trusts (REITs), cryptocurrencies, and major asset classes, including gold, and stock indices (S&P500 and Russell 2000). We observed significant and strong informational linkages between real estate tokens, REITs, SP500, and Russell 2000, highlighting that changes in equity markets and small-cap sentiment play a crucial role in shaping tokenized real estate dynamics. Moreover, the observed statistically significant bidirectional flows between S&P ETH and real estate tokens during the turbulence period like Covid-19 shows growing interconnection between crypto markets and real estate tokens. Our findings highlight the role of real estate tokens as receivers of information from broader financial markets, with limited capacity to transmit information back which offers valuable insights into the interconnected nature of traditional and digital markets, contributing to advancements in risk diversification, portfolio optimization, and the strategic development of digital asset investment frameworks.

Keywords: blockchain; Digital Assets; Entropy analysis; Real Estate Token (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2025-01-01
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