Frontier and Emerging Government Bond Markets
50 Pages Posted: 10 Oct 2015
Date Written: September 29, 2015
We investigate correlation dynamics and diversification properties of US dollar-denominated debt issued by governments of frontier markets. Our analysis is on the aggregate, regional, and country level, with a sample covering 29 countries over the period 2001-2013. We show that the correlation between the returns of frontier government bond markets and US government bonds is time-varying, but on average close to zero. Correlations with US investment grade corporate bonds, US corporate high yield bonds, and US dollar-denominated debt issued by governments of emerging markets are substantially higher, which limits diversification benefits for investors who already own these asset classes.
Keywords: Bonds, Emerging markets, Frontier markets, Diversification
JEL Classification: G11, G12, G15
Suggested Citation: Suggested Citation