Identifying Extreme Connectedness among Islamic Cryptocurrencies and Digital Tokens: Portfolio Implications

Purpose – The study evaluates the connectedness among the less riskier Digital Assets by investigating the functions of gold backed cryptocurrency alongwith Fan Tokens, Non-fungible Tokens and Real estate tokens, as a new alternative asset class that can be utilized by portfolio managers and investors alongwith policy makers. Design/methodology/approach – This study uses Quantile Vector Auto Regression analysis to measure the quantile cohesiveness among Islamic Cryptocurrencies, Non-Fungible Tokens, Fan Tokens and Real Estate Tokens, recommended by Ando et al., (2022) given extreme quantiles, which specify tail features among different markets performing under extreme conditions. The quantile cohesiveness proposed by Ando et al. (2022) is the blend of quantile vector auto regression with Diebold and Yilmaz (2012) methodology of spillovers for measuring the cohesiveness of the volatilities of markets for extreme higher (95th) and extreme lower (5th) quantiles. Findings – The findings of the QVAR divides spillover in two market condition i.e. median and extremes. In median market condition or we can say normal conditions findings of QVAR shows that Fan token is the major transmitter of shocks while Islamic crypto like X8X is major receiver of the shocks. In extreme condition the major transmitter remains the same i.e. Fan Tokens but major receiver of shock is Real Estate Tokens. Originality/ Value: – Study offer valuable insights to policy makers, portfolio managers and individual investors. For instance study enable the portfolio managers and investors to understand spillovers among Islamic Crypto, Non-Fungible Tokens, Fan Tokens and Real Estate tokens, which will help them in making suitable portfolios. By investigating the function of Islamic gold-backed cryptocurrencies as a new and alternative asset class that can be utilized by both portfolio managers and investors, looking to invest in Islamic Products, to lower their risk of investment. Research Implications: - This study brings novel insight for portfolio optimization and diversification. The findings of this study will have implications for global investor, researcher and policy makers.