The Sources of Momentum in International Government Bond Returns

Applied Economics, 2019, 51 (8), 848-857

22 Pages Posted: 1 Mar 2019

See all articles by Adam Zaremba

Adam Zaremba

Montpellier Business School; Poznan University of Economics and Business

George D. Kambouris

University of Dubai - Dubai Business School

Date Written: October 2, 2018

Abstract

This study aims to offer a new explanation for the momentum effect in international government bonds. Using cross-sectional and time-series tests, we examine a sample of bonds from 22 countries for the years 1980 through 2018. We document significant momentum profits that are not attributable to bond-specific risk factors, such as volatility or credit risk. The global bond momentum is driven by the returns on underlying foreign exchange rates. Controlling for currency movements fully explains the abnormal returns on momentum strategies in international government bonds. The results are robust to many considerations including alternative sorting periods, portfolio construction methods, as well as subperiod and subsample analysis.

Keywords: government bonds, sovereign bonds, currencies, foreign exchange, momentum, asset pricing, return predictability

JEL Classification: G12, G14, G15

Suggested Citation

Zaremba, Adam and Kambouris, George D., The Sources of Momentum in International Government Bond Returns (October 2, 2018). Applied Economics, 2019, 51 (8), 848-857, Available at SSRN: https://ssrn.com/abstract=3332942

Adam Zaremba (Contact Author)

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, Occitanie 34000
France

Poznan University of Economics and Business ( email )

al. Niepodległości 10
Poznań, 61-875
Poland

HOME PAGE: http://adamzaremba.pl

George D. Kambouris

University of Dubai - Dubai Business School ( email )

United Arab Emirates

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