International Bond Risk Premia

49 Pages Posted: 3 Sep 2010 Last revised: 14 Aug 2015

See all articles by Magnus Dahlquist

Magnus Dahlquist

Stockholm School of Economics; Swedish House of Finance

Henrik Hasseltoft

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: August 13, 2012

Abstract

We find evidence for time-varying risk premia across international bond markets. Local and global factors jointly predict returns. The global factor is closely linked to US bond risk premia and international business cycles. Movements in the global factor seem to drive risk premia and expected short-term interest rates in opposite directions. We consider an affine term-structure model in which risk premia are driven by one local and one global factor. Shocks to these factors account for only a small fraction of yield variance and the cross-section of yields conveys little information about the factors. Finally, correlations between international bond risk premia have increased over time, suggesting an increase in integration between markets.

Keywords: Affine model, local and global factors, time-varying risk premia

JEL Classification: E43, F31, G12, G15

Suggested Citation

Dahlquist, Magnus and Hasseltoft, Henrik, International Bond Risk Premia (August 13, 2012). Journal of International Economics, Vol. 90, No. 1, 2013. Available at SSRN: https://ssrn.com/abstract=1670006 or http://dx.doi.org/10.2139/ssrn.1670006

Magnus Dahlquist

Stockholm School of Economics ( email )

Drottninggatan 98
Stockholm, SE-111 60
Sweden

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Henrik Hasseltoft (Contact Author)

affiliation not provided to SSRN

Register to save articles to
your library

Register

Paper statistics

Downloads
378
Abstract Views
1,969
rank
37,500
PlumX Metrics