Pub Date : 2021-06-29DOI: 10.18510/hssr.2021.93137
Ibtasam Shah, I. Malik
Purpose: This study aims to investigate the moderating effect of risk perception on the relationship among emotional biases (i.e., regret aversion and loss aversion) and the trading frequency of individual investors in the context of the Pakistan Stock Exchange (PSX). Approach / Methodology: This study is conducted under the philosophical assumptions of the positivist paradigm and the approach is deductive. The convenience sampling technique is used for sample selection of registered individual investors on the database of PSX. This led the study towards designing a cross-sectional study. Furthermore, 384 questionnaires are used for the collection of primary data from a population of 0.22 million registered PSX individual investors. The direction and degree of relationship among variables of concern are analyzed by the multiple linear regression techniques. The structural Equation Modelling (SEM) technique is used for authentication of moderation results. Findings: The results depict that regret aversion and loss aversion have statistically significant and negative impacts on individual investors’ trading frequency. Whereas, risk perception has an insignificant & positive impact on individual investors’ trading frequency. Moreover, risk perception is found to moderate the relationship between these two emotional behavioral biases. Originality/Value: This current study is a pioneer in developing links between individual investors’ trading frequency, loss aversion, regret aversion, and risk perception. The article also contributes to the literature of behavioral finance, specifically while understanding the role of emotional biases in investment strategies. So, this article engenders the reader's thoughtfulness to find plausible explanations in minimizing the impact of emotional biases in trading frequency and decision-making of individual investors. Implications: This study implies that emotional biases and risk perception cause and moderate the magnitude of the trading frequency of individual investors. The regulatory bodies such as the Securities and Exchange Commission of Pakistan (SECP) and PSX can launch training programs for individual investors to train them in coping up with such emotional biases and risk perception. This might result in the enhancement of the market capitalization of the stock market.
{"title":"Role of Regret Aversion and Loss Aversion Emotional Biases in Determining Individual Investors’ Trading Frequency: Moderating Effects of Risk Perception","authors":"Ibtasam Shah, I. Malik","doi":"10.18510/hssr.2021.93137","DOIUrl":"https://doi.org/10.18510/hssr.2021.93137","url":null,"abstract":"Purpose: This study aims to investigate the moderating effect of risk perception on the relationship among emotional biases (i.e., regret aversion and loss aversion) and the trading frequency of individual investors in the context of the Pakistan Stock Exchange (PSX). \u0000Approach / Methodology: This study is conducted under the philosophical assumptions of the positivist paradigm and the approach is deductive. The convenience sampling technique is used for sample selection of registered individual investors on the database of PSX. This led the study towards designing a cross-sectional study. Furthermore, 384 questionnaires are used for the collection of primary data from a population of 0.22 million registered PSX individual investors. The direction and degree of relationship among variables of concern are analyzed by the multiple linear regression techniques. The structural Equation Modelling (SEM) technique is used for authentication of moderation results. \u0000Findings: The results depict that regret aversion and loss aversion have statistically significant and negative impacts on individual investors’ trading frequency. Whereas, risk perception has an insignificant & positive impact on individual investors’ trading frequency. Moreover, risk perception is found to moderate the relationship between these two emotional behavioral biases. \u0000Originality/Value: This current study is a pioneer in developing links between individual investors’ trading frequency, loss aversion, regret aversion, and risk perception. The article also contributes to the literature of behavioral finance, specifically while understanding the role of emotional biases in investment strategies. So, this article engenders the reader's thoughtfulness to find plausible explanations in minimizing the impact of emotional biases in trading frequency and decision-making of individual investors. \u0000Implications: This study implies that emotional biases and risk perception cause and moderate the magnitude of the trading frequency of individual investors. The regulatory bodies such as the Securities and Exchange Commission of Pakistan (SECP) and PSX can launch training programs for individual investors to train them in coping up with such emotional biases and risk perception. This might result in the enhancement of the market capitalization of the stock market.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"24 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-06-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86080599","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This research analyses the link between fundamental information, social media sentiment, and stock returns from 2010 to 2018. We are interested in whether social media sentiment provides additional information to already published fundamental information, such as financial information and analysts forecasts. Therefore, we explore the relationship between fundamental information and sentiment. We find that unexpected earnings, analyst forecast revisions, new dividends, and 8-K filings have a significant impact on sentiment. We introduce the adjusted social media sentiment, which corrects social media sentiment for the impact of this fundamental information. It turns out that adjusted social media sentiment is related to the subsequent stock returns. Moreover, most of social media sentiment's total effect emerges from adjusted sentiment. In particular, stocks with negative sentiment tend to have negative subsequent short-term returns. It is, thus, important to distinguish between positive and negative sentiment. Subsequent long-term returns are more mildly affected suggesting that the impact of negative sentiment seems to be permanent.
{"title":"Should Investors Consider the Sentiment of Online Discussions? An Analysis of the Link between Fundamental Information, Social Media Sentiment and the Stock Market","authors":"B. Eierle, Sebastian Klamer, Matthias Muck","doi":"10.2139/ssrn.3875576","DOIUrl":"https://doi.org/10.2139/ssrn.3875576","url":null,"abstract":"This research analyses the link between fundamental information, social media sentiment, and stock returns from 2010 to 2018. We are interested in whether social media sentiment provides additional information to already published fundamental information, such as financial information and analysts forecasts. Therefore, we explore the relationship between fundamental information and sentiment. We find that unexpected earnings, analyst forecast revisions, new dividends, and 8-K filings have a significant impact on sentiment. We introduce the adjusted social media sentiment, which corrects social media sentiment for the impact of this fundamental information. It turns out that adjusted social media sentiment is related to the subsequent stock returns. Moreover, most of social media sentiment's total effect emerges from adjusted sentiment. In particular, stocks with negative sentiment tend to have negative subsequent short-term returns. It is, thus, important to distinguish between positive and negative sentiment. Subsequent long-term returns are more mildly affected suggesting that the impact of negative sentiment seems to be permanent.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"13 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-06-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79260973","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Investor judgment and decision-making (JDM) is influenced by several factors. We examine the effect of dispositional goal orientation (approach and avoidance motivation), as well as situational goal orientation (gain- and loss-framing), on non-professional investors’ JDM. In an experiment, 150 business students evaluated the relevance of (positive and negative) information cues and estimated the resulting stock price changes. Results show that approach motivation increases the perceived relevance of (positive and negative) information cues, which in turn results in greater expected stock price changes. The increasing effect that approach motivation has on the perceived relevance of negative information cues is amplified by gain-framing and dampened by loss-framing. Similarly, the effect that the perceived relevance of information cues has on expected stock price changes is amplified under gain-framing and dampened under loss-framing. These results contribute to the JDM literature and have practical implications for non-professional investors.
{"title":"The Effects of Approach/Avoidance Motivation and Gain/Loss-Framing on the Processing of Information Cues by Non-Professional Investors","authors":"Stephanie Jana, Tyge-F. Kummer, Martin Schmidt","doi":"10.2139/ssrn.3664856","DOIUrl":"https://doi.org/10.2139/ssrn.3664856","url":null,"abstract":"Investor judgment and decision-making (JDM) is influenced by several factors. We examine the effect of dispositional goal orientation (approach and avoidance motivation), as well as situational goal orientation (gain- and loss-framing), on non-professional investors’ JDM. In an experiment, 150 business students evaluated the relevance of (positive and negative) information cues and estimated the resulting stock price changes. Results show that approach motivation increases the perceived relevance of (positive and negative) information cues, which in turn results in greater expected stock price changes. The increasing effect that approach motivation has on the perceived relevance of negative information cues is amplified by gain-framing and dampened by loss-framing. Similarly, the effect that the perceived relevance of information cues has on expected stock price changes is amplified under gain-framing and dampened under loss-framing. These results contribute to the JDM literature and have practical implications for non-professional investors.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-06-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89802312","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We explore in a series of incentivized experiments how stock market developments affect emotional arousal (proxied by pupil dilation, electrodermal activity, and heart rate variation), and how this emotional arousal in turn affects investment behavior. Experiencing stock market downswings increases emotional arousal (e.g., fear), while upswings do not trigger such an effect. The subsequent interplay between emotional arousal and investment behavior is by no means one-dimensional. The heightened level of emotional arousal after downswings reduces financial risk taking and thus the money put at stake, while the exposure to financial risks itself has a positive impact on subsequent emotional arousal. Our results inspire for future research and unifying theories where utility could also stem from (anticipated) emotions.
{"title":"Dynamics of Stock Market Developments, Financial Behavior, and Emotions","authors":"H. Cordes, Sven Nolte, Judith C. Schneider","doi":"10.2139/ssrn.3861699","DOIUrl":"https://doi.org/10.2139/ssrn.3861699","url":null,"abstract":"We explore in a series of incentivized experiments how stock market developments affect emotional arousal (proxied by pupil dilation, electrodermal activity, and heart rate variation), and how this emotional arousal in turn affects investment behavior. Experiencing stock market downswings increases emotional arousal (e.g., fear), while upswings do not trigger such an effect. The subsequent interplay between emotional arousal and investment behavior is by no means one-dimensional. The heightened level of emotional arousal after downswings reduces financial risk taking and thus the money put at stake, while the exposure to financial risks itself has a positive impact on subsequent emotional arousal. Our results inspire for future research and unifying theories where utility could also stem from (anticipated) emotions.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"245 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-06-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74125170","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Bobby Huang, Jiacui Li, Tse-Chun Lin, Mingzhu Tai, Yiyuan Zhou
Using proprietary loan screening data, we document that loan officers engage in “attention discrimination”: they exert less effort reviewing ex-ante disadvantage applicants, leading to higher rejection rates than otherwise justified by those applicants’ credit quality. Attention discrimination increases with the officers’ time constraints induced by quasi-random workload variations. When officer workload rises from the bottom to the top decile, they devote 70% less time to disadvantaged applicants, and the approval rate for those applicants declines by three-fifths. Our results indicate that attention constraints magnify discrimination, which provides policy implications about how to reduce discrimination in practice.
{"title":"Attention Discrimination under Time Constraints: Evidence from Retail Lending","authors":"Bobby Huang, Jiacui Li, Tse-Chun Lin, Mingzhu Tai, Yiyuan Zhou","doi":"10.2139/ssrn.3865478","DOIUrl":"https://doi.org/10.2139/ssrn.3865478","url":null,"abstract":"Using proprietary loan screening data, we document that loan officers engage in “attention discrimination”: they exert less effort reviewing ex-ante disadvantage applicants, leading to higher rejection rates than otherwise justified by those applicants’ credit quality. Attention discrimination increases with the officers’ time constraints induced by quasi-random workload variations. When officer workload rises from the bottom to the top decile, they devote 70% less time to disadvantaged applicants, and the approval rate for those applicants declines by three-fifths. Our results indicate that attention constraints magnify discrimination, which provides policy implications about how to reduce discrimination in practice.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"39 4 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80909192","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We introduce a novel measure to assess the valuation skills of investment-grade corporate bond funds. Our measure recognizes funds ex-ante holding a higher fraction of underpriced bonds as having better valuation skills. The measure predicts future fund performance, is stable over time, and is unrelated to other sources of skill. Fund investors recognize such skill by responding more to the past performance of funds with better valuation skills. Consistent with the equilibrium model of Gârleanu and Pedersen (2018), our evidence suggests that as growing capital gets allocated to skilled bond funds, the investment-grade corporate bond market is becoming more efficient.
{"title":"On the Valuation Skills of Corporate Bond Mutual Funds","authors":"G. Cici, Peixin Zhang","doi":"10.2139/ssrn.3803890","DOIUrl":"https://doi.org/10.2139/ssrn.3803890","url":null,"abstract":"We introduce a novel measure to assess the valuation skills of investment-grade corporate bond funds. Our measure recognizes funds ex-ante holding a higher fraction of underpriced bonds as having better valuation skills. The measure predicts future fund performance, is stable over time, and is unrelated to other sources of skill. Fund investors recognize such skill by responding more to the past performance of funds with better valuation skills. Consistent with the equilibrium model of Gârleanu and Pedersen (2018), our evidence suggests that as growing capital gets allocated to skilled bond funds, the investment-grade corporate bond market is becoming more efficient.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"39 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-05-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77518805","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This is a general eclectic theoretical framework that attempts to provide another practical understanding of how the market works and how to invest with chaos, non-ergodicity and inefficiency. It covers bubbles, corrections, volatility, correlation disturbances in crises by means of behaviorism and aspects of information, game and chaos theories and how market reality as a consensus is shaped. The article also touches on equilibrium as a reflection of expected normality, the danger of market “efficiency” in the light of non-ergodicity, information diffusion with market manipulation, the relativity of rationality, why pumping and bubbles are natural and why we should lower short-term capital gains taxes to the level of long-term ones in order to support the sustainability of the market. Current regulation and taxation policies jeopardize the long-term market's sustainability by undermining diversity and inclusion.
Old orthodox academic theories and views in financial economics are contradictory not only to themselves but also to the reasonableness and meaning of the entire industry. The author is a practitioner who is not bound by academia in financial economics. This article is written in a straightforward style that is more typical for essays. It skips the evolution of economic thought as well as obvious criticisms, and the function is to transmit and communicate with a broad audience.
{"title":"Consensus Market Hypothesis: This is Not a Guide to Market Manipulation","authors":"Constantine Ignatenko","doi":"10.2139/ssrn.3849315","DOIUrl":"https://doi.org/10.2139/ssrn.3849315","url":null,"abstract":"This is a general eclectic theoretical framework that attempts to provide another practical understanding of how the market works and how to invest with chaos, non-ergodicity and inefficiency. It covers bubbles, corrections, volatility, correlation disturbances in crises by means of behaviorism and aspects of information, game and chaos theories and how market reality as a consensus is shaped. The article also touches on equilibrium as a reflection of expected normality, the danger of market “efficiency” in the light of non-ergodicity, information diffusion with market manipulation, the relativity of rationality, why pumping and bubbles are natural and why we should lower short-term capital gains taxes to the level of long-term ones in order to support the sustainability of the market. Current regulation and taxation policies jeopardize the long-term market's sustainability by undermining diversity and inclusion. <br><br>Old orthodox academic theories and views in financial economics are contradictory not only to themselves but also to the reasonableness and meaning of the entire industry. The author is a practitioner who is not bound by academia in financial economics. This article is written in a straightforward style that is more typical for essays. It skips the evolution of economic thought as well as obvious criticisms, and the function is to transmit and communicate with a broad audience. <br><br>","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"5 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-05-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89236574","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Cryptocurrencies have become popular. Economic agents use cryptocurrencies such as bitcoins to make payments. They pose a threat to fiat currency. Central banks have begun to respond to this threat. They realize that they need to join the race to offer a digital currency and dominate the digital currency landscape which can lead to the collapse of most digital currencies that are not issued by a central bank or monetary authority. In this paper, I show how the creation of a central bank digital currency can lead to the collapse of digital currencies including cryptocurrencies and bitcoins. Central banks will leverage on their monetary powers, and the trust that citizens have in government-backed money. This will give central banks strong incentives to issue a central bank digital currency. The issuance of a central bank digital currency can lead to the collapse of cryptocurrencies although not immediately.
{"title":"Central Bank Digital Currency Can Lead to the Collapse of Cryptocurrency","authors":"Peterson K. Ozili","doi":"10.2139/ssrn.3850826","DOIUrl":"https://doi.org/10.2139/ssrn.3850826","url":null,"abstract":"Cryptocurrencies have become popular. Economic agents use cryptocurrencies such as bitcoins to make payments. They pose a threat to fiat currency. Central banks have begun to respond to this threat. They realize that they need to join the race to offer a digital currency and dominate the digital currency landscape which can lead to the collapse of most digital currencies that are not issued by a central bank or monetary authority. In this paper, I show how the creation of a central bank digital currency can lead to the collapse of digital currencies including cryptocurrencies and bitcoins. Central banks will leverage on their monetary powers, and the trust that citizens have in government-backed money. This will give central banks strong incentives to issue a central bank digital currency. The issuance of a central bank digital currency can lead to the collapse of cryptocurrencies although not immediately.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-05-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81292729","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Narjess Boubakri, Zhong Cao, Sadok El Ghoul, O. Guedhami, Xinming Li
This paper investigates the relationship between national culture and cross-country variations in bank liquidity creation. We hypothesize that banks in individualistic societies create more liquidity because of risk-taking and overconfidence bias. On the other hand, a better access to soft information likely facilitates liquidity creation by banks in collectivistic societies as well. Using a sample covering 66 countries over the 2001–2014 period, we find that individualism is associated with greater bank liquidity creation. This finding is robust to several sensitivity checks. The effect of individualism is stronger for larger banks, pointing to the importance of soft information on bank lending. Additional analysis suggests that uncertainty avoidance and power distance are related to lower bank liquidity creation.
{"title":"National Culture and Bank Liquidity Creation","authors":"Narjess Boubakri, Zhong Cao, Sadok El Ghoul, O. Guedhami, Xinming Li","doi":"10.2139/ssrn.3829416","DOIUrl":"https://doi.org/10.2139/ssrn.3829416","url":null,"abstract":"This paper investigates the relationship between national culture and cross-country variations in bank liquidity creation. We hypothesize that banks in individualistic societies create more liquidity because of risk-taking and overconfidence bias. On the other hand, a better access to soft information likely facilitates liquidity creation by banks in collectivistic societies as well. Using a sample covering 66 countries over the 2001–2014 period, we find that individualism is associated with greater bank liquidity creation. This finding is robust to several sensitivity checks. The effect of individualism is stronger for larger banks, pointing to the importance of soft information on bank lending. Additional analysis suggests that uncertainty avoidance and power distance are related to lower bank liquidity creation.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"230 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-04-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73923860","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract In early 2021, non-fungible tokens (NFT) became the first application of blockchain technology to achieve clear public prominence. NFTs are tradeable rights to digital assets (images, music, videos, virtual creations) where ownership is recorded in smart contracts on a blockchain. Given the NFT market emerged out of cryptocurrencies, we explore if NFT pricing is related to cryptocurrency pricing. A spillover index shows only limited volatility transmission effects between cryptocurrencies and NFTs. But wavelet coherence analysis indicates co-movement between the two sets of markets. This suggests that cryptocurrency pricing behaviours might be of some benefit in understanding NFT pricing patterns. However, the low volatility transmissions also indicate that NFTs can potentially be considered as a low-correlation asset class distinct from cryptocurrencies.
{"title":"Is Non-fungible Token Pricing Driven by Cryptocurrencies?","authors":"M. Dowling","doi":"10.2139/ssrn.3815093","DOIUrl":"https://doi.org/10.2139/ssrn.3815093","url":null,"abstract":"Abstract In early 2021, non-fungible tokens (NFT) became the first application of blockchain technology to achieve clear public prominence. NFTs are tradeable rights to digital assets (images, music, videos, virtual creations) where ownership is recorded in smart contracts on a blockchain. Given the NFT market emerged out of cryptocurrencies, we explore if NFT pricing is related to cryptocurrency pricing. A spillover index shows only limited volatility transmission effects between cryptocurrencies and NFTs. But wavelet coherence analysis indicates co-movement between the two sets of markets. This suggests that cryptocurrency pricing behaviours might be of some benefit in understanding NFT pricing patterns. However, the low volatility transmissions also indicate that NFTs can potentially be considered as a low-correlation asset class distinct from cryptocurrencies.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"704 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-03-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81974279","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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