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Correlations in Emerging Market Bonds: The Role of Local and Global Factors
Author: Mr. A. J Hamannhttps://orcid.org/0000-0002-6363-0398, Irina Bunda, and Mr. Subir Lall
Series:
IMF Working Papers
Volume/Issue:
Volume 2010: Issue 006
Language:
English
Publication Date:
01 Jan 2010
DOI:
https://doi.org/10.5089/9781451961775.001
ISBN:
9781451961775
ISSN:
1018-5941
Pages:
27
Keywords:
WP; market; EM bond; Hong Kong SAR market crash; interest rate; Emerging markets; bond markets; financial crises; comovement; contagion; EM bond return; market comovement; EMs bond; Argentinean crisis; EMs asset class; Bonds; Stock markets; Corporate bonds; Securities markets; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund