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

80 Pages Posted: 1 Sep 2021 Last revised: 26 Jun 2023

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

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

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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