Connectedness of non-fungible tokens and conventional cryptocurrencies with metals

Imran Yousaf, Mariya Gubareva and Tamara Teplova

The North American Journal of Economics and Finance, 2023, vol. 68, issue C

Abstract: Employing the vector auto-regression based on generalized forecast error variance decomposition, this paper investigates the connectedness of non-fungible tokens (NFTs) with precious and industrial metals and compares the results with those for conventional cryptocurrencies (CCCs). Our study scrutinizes separately the total static and the net dynamic spillovers of returns and volatilities from March 2018 to August 2021. We evidence that both, the total return and total volatility connectedness indices for the NFTs-metals framework are below the respective indices for the CCCs-metals framework, indicating new avenues for hedging and harvesting diversification benefits of NFT exposures. We provide empirical evidence that the NFTs are distinct from the CCCs not only in terms of the volatility spillovers, but in terms of the return spillovers too. In addition, we observe the decoupling in the net volatility spillovers between the precious and non-precious metals due to the COVID-19 meltdown. COVID-19 makes precious metals transmit volatility while industrial metals continue acting as net receivers of volatility shocks. Optimal weight and hedge ratios are presented for NFT-metal and crypto-metal pairs. These findings provide potential implications for investors and policy makers.

Keywords: Non-fungible tokens (NFTs); Cryptocurrencies; Static and dynamic connectedness; Return and volatility spillovers; Precious and non-precious metals; COVID-19; Optimal weights and hedge ratios (search for similar items in EconPapers)
JEL-codes: F3 G10 G12 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:68:y:2023:i:c:s1062940823001183

DOI: 10.1016/j.najef.2023.101995

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