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Author: Delroy M. Hunter Publisher: ISBN: Category : Languages : en Pages : 37
Book Description
This paper assesses the incremental diversification benefits to US investors from investing in international government bonds. In light of suggestions that these benefits have fallen sharply in the recent decade due to more closely synchronized business cycles, we use mean-variance spanning tests to show that currency-hedged bonds provide significant diversification benefits over the period from January 1992 to September 2002. Using a bivariate GARCH framework, we find that US bond returns have become increasingly correlated with UK and German bond returns, but have experienced declining correlations with Japanese bonds. The changing correlations are consistent with variation in the synchronization of business cycles. However, the evidence suggests that correlations have not become high enough to threaten the gains from diversification and that these gains on a currency-hedged basis are not diminished during periods of weakness or increased volatility in US or foreign bond markets. Conditional Sharpe ratios also demonstrate that risk-reward tradeoffs for each bond market vary in a predictable manner, which further underscores the potential benefits of international bond investing. Finally, we demonstrate how conditional yield betas and conditional yield beta adjusted foreign bond durations can be constructed from our model estimates.
Author: Delroy M. Hunter Publisher: ISBN: Category : Languages : en Pages : 37
Book Description
This paper assesses the incremental diversification benefits to US investors from investing in international government bonds. In light of suggestions that these benefits have fallen sharply in the recent decade due to more closely synchronized business cycles, we use mean-variance spanning tests to show that currency-hedged bonds provide significant diversification benefits over the period from January 1992 to September 2002. Using a bivariate GARCH framework, we find that US bond returns have become increasingly correlated with UK and German bond returns, but have experienced declining correlations with Japanese bonds. The changing correlations are consistent with variation in the synchronization of business cycles. However, the evidence suggests that correlations have not become high enough to threaten the gains from diversification and that these gains on a currency-hedged basis are not diminished during periods of weakness or increased volatility in US or foreign bond markets. Conditional Sharpe ratios also demonstrate that risk-reward tradeoffs for each bond market vary in a predictable manner, which further underscores the potential benefits of international bond investing. Finally, we demonstrate how conditional yield betas and conditional yield beta adjusted foreign bond durations can be constructed from our model estimates.
Author: Mats Hansson Publisher: ISBN: Category : Languages : en Pages : 49
Book Description
We investigate the incremental role of emerging market debt and corporate bonds in internationally diversified government bond portfolios. Contrary to earlier results, we find that international diversification among government bonds does not yield significant diversification benefits. This result is obtained using mean-variance spanning and intersection tests, with restrictions for short sales, both for currency unhedged and hedged international developed market government bonds. Currency hedged international corporate bonds in turn do offer some diversification benefits, and emerging market debt in particular significantly shifts the mean-variance frontier for a developed market investor. Since especially unconstrained mean-variance spanning and intersection tests can indicate significant diversification benefits, but lead to frontier portfolios with extreme weights, we also consider some ex-ante global government bond portfolio strategies. We find that passive global benchmarks such as GDP-weighed government bond portfolios perform quite well within developed countries.
Author: Brynjolfur Einar Sigmarsson Publisher: ISBN: Category : Languages : en Pages : 112
Book Description
investors generally experience diversification benefits by adding foreign bonds to their domestic bond portfolio. Further, financial integration is found to increase within the largest developed countries. Diversification benefits are most for the last two year of the study period when short sales are allowed, where it is believed that the financial crisis has not fully reach emerging markets and small economies like Denmark.
Author: Richard M. Levich Publisher: ISBN: Category : Bond funds Languages : en Pages : 48
Book Description
A new statistical procedure is used to test for weak form efficiency in the foreign exchange futures markets. Using daily currency futures prices for the 1976-1990 period, we conclude that successive exchange rate changes have not been independent We examine the implications of this finding for two groups of investors: (1) return seeking investors considering foreign exchange as a separate asset class; (2) international portfolio investors deciding whether or not to currency hedge the foreign exchange rate exposures embedded in their non-dollar investments. Using the currency futures data and monthly data on 10-year dollar and non-dollar bonds, we conclude that active currency risk management, based on a simple application of technical trading signals, can substantially improve the risk-return opportunities for both groups of investors in comparison to passive currency strategies.
Author: Ms.Anastasia Guscina Publisher: International Monetary Fund ISBN: 1498310680 Category : Business & Economics Languages : en Pages : 40
Book Description
International bond issuance by debut issuers has risen in recent years. The uptick was a result of both demand and supply factors. The search for yield and demand for portfolio diversification have resulted in demand-driven easy financing conditions. At the same time, rising financing needs for many debut issuers, coupled with reduced access to concessional financing, relatively undeveloped domestic markets, and a favorable interest rate environment have made international bonds an attractive financing alternative for many countries. As bonds issued in the international markets are typically denominated in hard currencies, have large volumes and a bullet structure, exposure to exchange rate and refinancing risk has increased. Therefore, risk-mitigating policy actions are needed to prepare for redemption, support debt sustainability, and secure adequate debt management capacity.
Author: Miranda Lam Publisher: ISBN: Category : Languages : en Pages : 34
Book Description
I study the risk and return characteristics of international bond mutual funds during 1988-1995. These actively managed funds do not demonstrate superior performance, net of expenses, against a wide range of benchmarks and I show that fund expenses are negatively related to performance. I find that returns on international bond funds are sensitive to exchange rate movements, while controlling for local currency returns on international bond indices. The funds have high exposure to the European, Canadian and U.S. bond markets and they are least sensitive to the Japanese Bond index and movements in Japanese Yen. I also find that the funds do not outperform a U.S. index, suggesting that U.S. investors did not gain diversification benefits using international bond funds.
Author: Delroy M. Hunter
Author: Delroy M. Hunter
Author: Mats Hansson
Author: Roberto A. De Santis
Author: Brynjolfur Einar Sigmarsson
Author: Neil C. Williams
Author: Cheol S. Eun
Author: Theodore Michael Johnson
Author: Richard M. Levich
Author: Ms.Anastasia Guscina
Author: Miranda Lam