Music stocks and music tokens: Extreme connectedness and portfolio applications

The study's purpose is to examine the connectedness and portfolio implications between music tokens and music stocks. Spillovers between music tokens and music stocks differ across various circumstances. Under normal circumstances, there is a significant unconnected between music tokens and music stocks. In extreme declines and rises, the return interconnectedness between the assets increases dramatically. Additionally, return spillovers among assets fluctuate over time, influenced by extreme events such as the Russia-Ukraine war and the cryptocurrency market collapse. In the framework of portfolio applications, music tokens have been found to have hedging properties for music stocks. In particular, music tokens added to portfolios at optimal rates exhibit very high hedging properties for SiriusXM Radio (SIRI) and Tencent Music Entertainment Group (TME). The results are important for investors and portfolio managers. • Music tokens have hedging features against music stocks. • Optimal proportions of music tokens added to portfolios provide between 5% and 54% hedging efficiency for WMG, SIRI, SPOT, and TME. • In all market conditions, there is no significant connectedness between music tokens and music stocks. • During extreme market downturns and upturns, the return interconnectedness among assets increases. • The net return spillovers between music tokens and music stocks vary under different market conditions.