Connectedness of non-fungible tokens and conventional cryptocurrencies with metals

North American Journal of Economics and Finance. 2023. Vol. 68. Article 101995.

Yousaf I., Gubareva M., Teplova T.

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: криптовалюты, Cryptocurrencies, COVID-19, Return and volatility spillovers, переливы доходности и волатильности, COVID-19, Non-fungible tokens (NFTs), Static and dynamic connectedness, Precious and non-precious metals, Optimal weights and hedge ratios, невзаимозаменяемые токены, статическая и динамическая взаимосвязь, драгоценные и недрагоценные металлы, оптимальные веса и коэффициенты хеджирования

Publication based on the results of: Analysis of the behavior of financial assets under the influence of exogenous factors (2023)