The economic value of NFT: Evidence from a portfolio analysis using mean-variance framework

Abstract

We investigate whether the inclusion of NFTs in portfolio investing in traditional assets provides a significant diversification benefit for constructing a well-diversified portfolio. We examine Pearson's correlation, the Gerber Statistic for co-movement, and the spillover index for volatility transmission. Our findings suggest that NFTs are distinct from traditional assets, potentially resulting in portfolio diversification. Using the mean-variance approach, empirical results demonstrate there exist a statistically significant evidence that the inclusion of NFTs improves the performance of equally weighted and tangency portfolio strategies in terms of Sharpe ratio. It confirms that NFTs have a diversification effect on the traditional asset-based portfolios.