代 DAI Digital Art Index : A robust price index for heterogeneous digital assets

The big bang of non-fungible tokens (NFTs) has caused the birth of a brand new era for digital art. NFTs, driven by blockchain and smart contracts, provide both artists and art collectors an unprece- dented marketplace equipped with more security, flexibility, publicity, and freedom to monetize. Unlike the conventional art market, NFT art market trades works of art in rapid succession and has no slug- gish business cycle. Yet, the emergence of such a market has been considered to be packed with speculation and economic uncertainty, given the limited understanding towards this market. To precisely depict the NFT art market and offer a gauge for market volatility, we construct the price index – Digital Art Index (DAI) – using hedonic regression on the top 10 liquid NFT art collections and provide an empirical overview. Due to the common phenomenon of outlying price observations, we propose two innovative alternative procedures – Huberization and DCS-t filtering to create a robust index. Moreover, by considering each artwork’s time-variant and time-invariant characteristics, we are able to investigate price determinants and access the intrinsic value of the market.All the supplementary materials and source codes can be found in the Q2 ecosystem: Quantlet.com and Quantinar.com