The impact of sovereign risk on bond duration: Evidence from Asian sovereign bond markets |
| |
| Authors: | Hei Wai Lee Yan Alice Xie Jot Yau |
| |
| Institution: | 1. College of Business, University of Michigan, Dearborn, Fairlane Center South, 19000 Hubbard Drive, Dearborn, MI 48126, United States;2. Albers School of Business and Economics, Seattle University, 901 12th Avenue, Seattle, WA 98122, United States;1. State Key Laboratory of Separation Membranes and Membrane Processes, Tianjin Municipal Key Lab of Advanced Energy Storage Material and Devices, School of Material Science and Engineering, Tianjin Polytechnic University, Tianjin 300387, China;2. Chemistry Department, School of Science, Tianjin University, Tianjin 300072, China;1. Queens University, Dunning Hall, Room 209, Kingston, Ontario, Canada K7L 3N6;2. OECD, Paris, France;1. University of Economics, Ho Chi Minh City, Viet Nam;2. CFVG, Ho Chi Minh City, Viet Nam |
| |
| Abstract: | This paper examines the effect of sovereign risk on bond duration. We compare the sovereign risk-adjusted duration for U.S. dollar-denominated Asian sovereign bonds with their Macaulay duration for both investment grade bonds and speculative grade bonds. We find that the sovereign risk-adjusted duration is significantly shorter than its Macaulay counterpart for all bonds, regardless of their bond rating and their maturity. Further, the “shortening” effect of sovereign risk on duration gets stronger as bond rating deteriorates and in recessionary conditions. Our findings provide strong support for the importance of adjusting for sovereign risk when bond portfolio managers apply the popular duration measure to hedge interest rate risk. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
