Journal
FINANCE RESEARCH LETTERS
Volume 47, Issue -, Pages -Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.frl.2022.102784
Keywords
Non-fungible tokens; Portfolio analysis; Mean-variance framework; The diversification effect
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Funding
- National Research Foundation of Korea (NRF) - Korean government (MSIT) [NRF-2019R1A2C2002358, 2017R1A5A1015626]
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This study investigates the potential diversification benefits of including NFTs in portfolio investing in traditional assets. The results suggest that NFTs are distinct from traditional assets and can improve the performance of the portfolio strategies in terms of Sharpe ratio.
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.
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