A0630
Title: Return correlation and volatility spillover among NFT, NFT-related coin, and cryptocurrency markets
Authors: Kin Hon Ho - The Hang Seng University of Hong Kong (Hong Kong) [presenting]
Tse-Tin Chan - The Hang Seng University of Hong Kong (Hong Kong)
Philip Yu - The Education University of Hong Kong (Hong Kong)
Abstract: Since early 2021, non-fungible tokens (NFTs) have received tremendous attention, and their prices have boosted dramatically. There are various types of NFTs, such as collectibles, artworks, and digital characters in metaverses. With the success of NFTs, NFT-related coins and traditional cryptocurrencies play an essential role in the NFT ecosystem. One may find it interesting to explore the relationships among NFT, NFT-related coins, and traditional cryptocurrency markets regarding their pricing. We investigate these relationships by exploring their return correlation using wavelet coherence analysis to measure the co-movement of assets in terms of both time and frequency. We also use connectedness (spillover) indices to examine the volatility shock transmission from one market to another markets. Our results reveal moderate correlations between NFT-related coins and traditional cryptocurrencies, as well as strong correlations between NFT-related coins. Nevertheless, there are weak return correlations and low volatility transmission between NFT and cryptocurrency markets as well as between NFTs. More interestingly, there is no significant correlation and volatility transmission between NFTs and their related coins in most cases, especially in short cycles, where they are generally perceived to be closely associated. Therefore, insights into facilitating risk management through portfolio diversification are provided.
