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Not just the news: Higher moments of macroeconomic variables and sovereign bond returns

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  • Li, Yulin
  • Wald, John K.
  • Wang, Zijun

Abstract

Using sovereign debt data from 47 countries, we document that the third moment (skewness) of unemployment changes has a positive and significant relation with sovereign bond returns. Thus, while investors require risk premia for exposure to macroeconomic shocks (Campbell, 1996), we find that the skewness of unemployment changes contains information that helps to explain sovereign bond returns beyond the current shocks to the unemployment rate. This relation holds for both dollar and local currency sovereign debt returns, and after controlling for the information content of news events. The relation is greater in economic expansions than in contractions.

Suggested Citation

  • Li, Yulin & Wald, John K. & Wang, Zijun, 2025. "Not just the news: Higher moments of macroeconomic variables and sovereign bond returns," Global Finance Journal, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:glofin:v:66:y:2025:i:c:s1044028325000407
    DOI: 10.1016/j.gfj.2025.101113
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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