Emerging Markets Inflation-Linked Bonds
31 Pages Posted: 28 Jun 2011 Last revised: 18 Jul 2016
Date Written: February 12, 2012
Abstract
We investigate the added value of inflation-linked bonds in an investment portfolio. Recently, several studies questioned the added value of inflation-linked bonds based on empirical analyses on developed markets. We extend the cross-section of countries with a set of nine emerging markets and conclude that for many of these countries the inclusion of inflation-linked bonds improves the risk-return characteristics of investment portfolios. We also document that inflation-linked bond returns correlate more with realized inflation than nominal bonds, even on the short run. Hence, investors that invest in nominal bonds and equities should also allocate a significant amount to inflation-linked bonds. Furthermore, our mean-variance spanning tests indicate that US investors that already invest in emerging markets nominal bonds and emerging markets equities benefit from adding emerging markets inflation-linked bonds to their investment portfolio.
Keywords: allocation, bonds, emerging debt, emerging markets, fixed income, inflation, inflation-linked bonds
JEL Classification: F21, G11, G15
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Paper statistics
Recommended Papers
-
Pricing Treasury Inflation Protected Securities and Related Derivatives Using an Hjm Model
-
The TIPS Yield Curve and Inflation Compensation
By Refet S. Gürkaynak, Brian P. Sack, ...
-
Understanding Inflation-Indexed Bond Markets
By John Y. Campbell, Robert J. Shiller, ...
-
Understanding Inflation-Indexed Bond Markets
By John Y. Campbell, Robert J. Shiller, ...
-
Understanding Inflation-Indexed Bond Markets
By John Y. Campbell, Robert J. Shiller, ...
-
Why Does the Treasury Issue TIPS? The TIPS-Treasury Bond Puzzle
-
Why Does the Treasury Issue Tips? The Tips-Treasury Bond Puzzle
-
By Joseph G. Haubrich, Peter H. Ritchken, ...
-
By Joseph G. Haubrich, George Pennacchi, ...