Alternative Investments in the Fintech Era: The Risk and Return of Non-fungible Token (NFT)

59 Pages Posted: 1 Sep 2021 Last revised: 20 Apr 2022

See all articles by De-Rong Kong

De-Rong Kong

National Taiwan University - Department of Finance

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics

Date Written: August 30, 2021

Abstract

We study one of the earliest and largest NFT collections and find that NFTs have higher returns than traditional financial assets. However, investing in NFTs comes along with extremely high volatility, leading to a comparable Sharpe ratio to the NASDAQ index. NFT prices surge when there is a drastic increase in demand for alternative investments and a search for yield in a low interest rate environment. The pricing of NFT also largely depends on a token’s scarceness and investors’ aesthetic preference. Overall, we provide the first comprehensive analysis that NFTs serve as a novel investment vessel in this Fintech era.

Keywords: Non-Fungible Tokens, NFT, Fintech, Ethereum, Blockchain, Alternative investments, Risk and return

JEL Classification: C43, D44, G11, G12, Z11

Suggested Citation

Kong, De-Rong and Lin, Tse-Chun, Alternative Investments in the Fintech Era: The Risk and Return of Non-fungible Token (NFT) (August 30, 2021). Available at SSRN: https://ssrn.com/abstract=3914085 or http://dx.doi.org/10.2139/ssrn.3914085

De-Rong Kong (Contact Author)

National Taiwan University - Department of Finance ( email )

1, Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

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