IDEAS home Printed from https://ideas.repec.org/p/bca/bocawp/10-14.html
   My bibliography  Save this paper

International Capital Flows and Bond Risk Premia

Author

Listed:
  • Jesus Sierra

Abstract

This paper studies the impact of international capital flows on asset prices through risk premia. We investigate whether foreign purchases of U.S. Treasury securities significantly contributed to the decline in excess returns on long-term bonds between 1995 and 2008. We run forecasting regressions of realized excess returns on measures of net purchases of treasuries by both foreign official and private agents. We find a clear distinction in the effects of flows on excess returns. Official flows, with a negative and non-linear effect, appear similar to relative supply shocks; private net purchases, with a positive and linear effect, resemble flows that absorb excess supply and are thus compensated in equilibrium for this service, similar to the role of arbitrageurs in preferred-habitat models of the term structure.

Suggested Citation

  • Jesus Sierra, 2010. "International Capital Flows and Bond Risk Premia," Staff Working Papers 10-14, Bank of Canada.
  • Handle: RePEc:bca:bocawp:10-14
    as

    Download full text from publisher

    File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/06/wp10-14.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Beltran, Daniel O. & Kretchmer, Maxwell & Marquez, Jaime & Thomas, Charles P., 2013. "Foreign holdings of U.S. Treasuries and U.S. Treasury yields," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 1120-1143.
    2. John Nana Francois, 2016. "Foreign Official Holdings of U.S Treasuries, Stock Effect and the Economy: A DSGE Approach," 2016 Papers pfr351, Job Market Papers.

    More about this item

    Keywords

    Financial markets;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:10-14. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://www.bank-banque-canada.ca/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.