Diversification benefits of NFTs for conventional asset investors: Evidence from CoVaR with higher moments and optimal hedge ratios
- Authors
- Umar, Zaghum; Usman, Muhammad; Choi, Sun -Yong; Rice, John
- Issue Date
- Apr-2023
- Publisher
- ELSEVIER
- Keywords
- Non-Fungible Tokens; CoVaR; Portfolio Choice; Systemic risk; Higher moments
- Citation
- RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE, v.65
- Journal Title
- RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE
- Volume
- 65
- URI
- https://scholarworks.bwise.kr/gachon/handle/2020.sw.gachon/88059
- DOI
- 10.1016/j.ribaf.2023.101957
- ISSN
- 0275-5319
- 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 in- come securities, and commodities, and document the desirable hedging and portfolio attributes of NFTs by employing Conditional Value-at-Risk (CoVaR) and Delta CoVaRs with various copula func- tions. 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 in- vestors, risk managers, and regulators.
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