Diversification benefits of NFTs for conventional asset investors: Evidence from CoVaR with higher moments and optimal hedge ratios

Zaghum Umar, Muhammad Usman, Sun-Yong Choi and John Rice

Research in International Business and Finance, 2023, vol. 65, issue C

Abstract: This study investigates the risk and returns on one of the newest digital asset classes instruments, non-fungible tokens (NFTs), by accounting for tail dependence of higher-order moments and portfolio characteristics. We used a wide range of asset classes, encompassing equites, fixed income securities, and commodities, and document the desirable hedging and portfolio attributes of NFTs by employing Conditional Value-at-Risk (CoVaR) and ∆CoVaRs with various copula functions. We found that NFTs exhibit beneficial investment and hedging attributes under all market conditions, including the Covid-19 pandemic. Our findings have important implications for investors, risk managers, and regulators.

Keywords: Non-Fungible Tokens; CoVaR; Portfolio Choice; Systemic risk; Higher moments (search for similar items in EconPapers)
JEL-codes: F3 G1 G11 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:65:y:2023:i:c:s0275531923000831

DOI: 10.1016/j.ribaf.2023.101957

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