Non-Fungible Tokens as Investment

[PRE-RELEASED VERSION]

William N. Goetzmann, Dong Huang, Milad Nozari

William N. Goetzmann is the Edwin J. Beinecke Professor of Finance and Management Studies, Faculty Director of the International Center for Finance at the Yale School of Manage­ment, and the Executive Editor of the Financial Analysts Journal. He has published several papers in the economics of the arts.
Dong Huang is a Ph.D. candidate in Finance at Yale University School of Manage­ment. His current research focuses on behavioral finance, household finance, and fintech. 
Milad Nozari is a Manager of Decision Science at Travelers Insurance. He previously worked in the financial industry and at Yale University, conducting quantitative research in economics and finance.

ABSTRACT
NFTs provided an extraordinary real-time laboratory for bubble economics: returns were exceptionally right-skewed, illiquidity pervaded even the most active platforms, and a handful of trades drove aggregate performance. Investors extrapolating from realized returns without recognizing selection bias and survivorship faced a substantial risk of disappointment. As our data and simulations confirm, successful NFT investing during the bubble required an almost perfect confluence of timing, liquidity, and luck.

KEYWORDS
NFT; art; auctions