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

Abstract

Our study highlights the NFT rarity as a key determinant of price premium in the cross-section. Moreover, well-connected investors, who establish their central positions in the NFT network through early adoption and active trading, enjoy pricing advantages. We also find that experienced investors pay lower prices for NFTs. As an investment class, NFTs exhibit a high-return and high-risk profile when compared to traditional assets, especially in a low-interest-rate environment, and outperform most other alternative assets, such as luxury goods, private equity, and artwork. Overall, we provide novel and comprehensive analyses of NFTs, a digital alternative investment in the Fintech era.

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

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