Correlations in Emerging Market Bonds: The Role of Local and Global Factors

January 1, 2010

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Format: Chicago

A. J Hamann, Irina Bunda, and Subir Lall. Correlations in Emerging Market Bonds: The Role of Local and Global Factors, (USA: International Monetary Fund, 2010) accessed November 8, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the comovement in emerging market bond returns and disentangles the influence of external and domestic factors. 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 using a simple measure of cross-country correlations together with the commonly used average correlation coefficient can be more informative during episodes of heightened market instability. Data for the period 1997-2008 are analyzed for evidence of true contagion and common external shocks.

Subject: Bonds, Corporate bonds, Financial crises, Financial institutions, Financial markets, Securities markets, Stock markets

Keywords: Argentinean crisis, Bond markets, Bonds, Comovement, Contagion, Corporate bonds, EM bond, EM bond return, Emerging markets, EMs asset class, EMs bond, Financial crises, Global, Hong Kong SAR market crash, Interest rate, Market, Market comovement, Securities markets, Stock markets, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/006
Stock No:

WPIEA2010006
ISBN:

9781451961775
ISSN:

1018-5941

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