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

27 Pages Posted: 18 Jan 2010

See all articles by Irina Bunda

Irina Bunda

IMF-Singapore Regional Training Institute

A. Javier Hamann

affiliation not provided to SSRN

Subir Lall

International Monetary Fund (IMF)

Date Written: Janurary 2010

Abstract

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.

Keywords: Asset prices, Bond markets, Cross country analysis, Economic models, Emerging markets, Financial crisis

Suggested Citation

Bunda, Irina and Hamann, A. Javier and Lall, Subir, Correlations in Emerging Market Bonds: The Role of Local and Global Factors (Janurary 2010). IMF Working Paper No. 10/6, Available at SSRN: https://ssrn.com/abstract=1537515

Irina Bunda (Contact Author)

IMF-Singapore Regional Training Institute ( email )

10 Shenton Way
MAS Building #14-03
Singapore, Singapore 079117
Singapore

A. Javier Hamann

affiliation not provided to SSRN

No Address Available

Subir Lall

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202 623 6113 (Phone)

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