UZH-Logo

Maintenance Infos

International Bond Risk Premia


Dahlquist, Magnus; Hasseltoft, Henrik (2013). International Bond Risk Premia. Journal of International Economics, 90(1):17-32.

Abstract

We identify local and global factors across international bond markets that are poorly spanned by the cross-section of yields but have strong forecasting power for future bond excess returns. Local and global factors are jointly signicant predictors of bond returns, where the global factor is closely linked to US bond risk premia and international business cycles. Motivated by our results, we estimate a no-arbitrage ane term structure model for each country in which movements in risk premia are driven by one local and one global factor. Yield loadings for the two factors are estimated to be close to zero while shocks to risk premia account for a small fraction of yield variance. This suggests that the cross-section of yields conveys little information about the return-forecasting factors. We show that shocks to global risk premia cause osetting movements in expected returns and expected future short-term interest rates, leaving current yields little affected. Furthermore, correlations between international bond risk premia have increased over time, indicating an increase in integration between markets.

We identify local and global factors across international bond markets that are poorly spanned by the cross-section of yields but have strong forecasting power for future bond excess returns. Local and global factors are jointly signicant predictors of bond returns, where the global factor is closely linked to US bond risk premia and international business cycles. Motivated by our results, we estimate a no-arbitrage ane term structure model for each country in which movements in risk premia are driven by one local and one global factor. Yield loadings for the two factors are estimated to be close to zero while shocks to risk premia account for a small fraction of yield variance. This suggests that the cross-section of yields conveys little information about the return-forecasting factors. We show that shocks to global risk premia cause osetting movements in expected returns and expected future short-term interest rates, leaving current yields little affected. Furthermore, correlations between international bond risk premia have increased over time, indicating an increase in integration between markets.

Citations

5 citations in Web of Science®
5 citations in Scopus®
Google Scholar™

Altmetrics

Downloads

342 downloads since deposited on 14 Sep 2010
108 downloads since 12 months
Detailed statistics

Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Affine model, local and global factors, time-varying risk premia
Language:English
Date:2013
Deposited On:14 Sep 2010 07:36
Last Modified:05 Apr 2016 14:14
Publisher:Elsevier
ISSN:0022-1996
Publisher DOI:https://doi.org/10.1016/j.jinteco.2012.11.008
Related URLs:http://www.efa2010.org
Permanent URL: https://doi.org/10.5167/uzh-35536

Download

[img]
Preview
Filetype: PDF
Size: 822kB
View at publisher

TrendTerms

TrendTerms displays relevant terms of the abstract of this publication and related documents on a map. The terms and their relations were extracted from ZORA using word statistics. Their timelines are taken from ZORA as well. The bubble size of a term is proportional to the number of documents where the term occurs. Red, orange, yellow and green colors are used for terms that occur in the current document; red indicates high interlinkedness of a term with other terms, orange, yellow and green decreasing interlinkedness. Blue is used for terms that have a relation with the terms in this document, but occur in other documents.
You can navigate and zoom the map. Mouse-hovering a term displays its timeline, clicking it yields the associated documents.

Author Collaborations