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Correlations in emerging market bonds: The role of local and global factors

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  • Bunda, Irina
  • Hamann, A. Javier
  • Lall, Subir

Abstract

This paper empirically assesses co-movements in emerging market bond returns and disentangles the roles of external and domestic factors during episodes of heightened market volatility. The conceptual framework, set in the context of asset allocation, allows us to describe the channels through which shocks originating in a particular emerging or mature market are transmitted across countries and markets. We show that a simple measure of cross-country correlations, when presented together with the more commonly used average correlation coefficient, can be more informative during episodes of heightened market volatility. Data for the period 1997-2008 are analysed for evidence of true contagion and common external shocks.

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Bibliographic Info

Article provided by Elsevier in its journal Emerging Markets Review.

Volume (Year): 10 (2009)
Issue (Month): 2 (June)
Pages: 67-96

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Handle: RePEc:eee:ememar:v:10:y:2009:i:2:p:67-96

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Web page: http://www.elsevier.com/locate/inca/620356

Related research

Keywords: Emerging bond markets International financial crises Excess comovement Contagion Public debt;

References

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Citations

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Cited by:
  1. Marcel Förster & Markus Jorra & Peter Tillmann, 2012. "The Dynamics of International Capital Flows: Results from a Dynamic Hierarchical Factor Model," MAGKS Papers on Economics 201221, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  2. Eterovic, Nicolas A. & Eterovic, Dalibor S., 2013. "Separating the wheat from the chaff: Understanding portfolio returns in an emerging market," Emerging Markets Review, Elsevier, vol. 16(C), pages 145-169.
  3. Brian M. Lucey, QiYu Zhang* School of Business, Trinity College Dublin, Ireland, 2009. "Does cultural distance matter in international stock market comovement? Evidence from emerging economies around the world," The Institute for International Integration Studies Discussion Paper Series iiisdp304, IIIS.
  4. Alexopoulou, Ioana & Bunda, Irina & Ferrando, Annalisa, 2009. "Determinants of government bond spreads in new EU countries," Working Paper Series 1093, European Central Bank.
  5. Piljak, Vanja, 2013. "Bond markets co-movement dynamics and macroeconomic factors: Evidence from emerging and frontier markets," Emerging Markets Review, Elsevier, vol. 17(C), pages 29-43.
  6. Dalibor Eterovic & Nicolas Eterovic, 2012. "Separating the Wheat from the Chaff: Understanding Portfolio Returns in an Emerging Market," Working Papers wp_025, Adolfo Ibáñez University, School of Government.
  7. Küçük, Ugur N., 2009. "Emerging Market Local Currency Bond Market, Too Risky to Invest?," MPRA Paper 21878, University Library of Munich, Germany.
  8. Kearney, Colm, 2012. "Emerging markets research: Trends, issues and future directions," Emerging Markets Review, Elsevier, vol. 13(2), pages 159-183.

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