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An Analysis of the Impact of Selected Factors on the Bond Market

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  • Blanka Francová

    (Department of Economics, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic)

Abstract

Exchange rate risk is important factor for the valuation of capital asset on international markets. According to the International Arbitrage Pricing Theory currency movements affect the prices of capital assets and associated risk premiums. The International Arbitrage Pricing Theory is based on total return of asset decomposition to non-currency return and currency return. The currency return is defined by exchange rate risk and the non-currency return is defined by factors affecting the price of capital assets. We propose an empirical model to apply this theory using corporate bonds. Using a rich dataset from Morningstar in the period 2001-2017 we employ the linear regression analysis method OLS with fixed effects. We apply the model for different bond yields and different time-series. The factors influence bond price differently for each yield and each time-series. Our results confirm that currency movements significantly affect the bond prices.

Suggested Citation

  • Blanka Francová, 2018. "An Analysis of the Impact of Selected Factors on the Bond Market," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 66(6), pages 1451-1458.
    • Handle: RePEc:mup:actaun:actaun_2018066061451
    DOI: 10.11118/actaun201866061451
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    References listed on IDEAS

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