Bond markets co-movement dynamics and macroeconomic factors: Evidence from emerging and frontier markets |
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| Institution: | 1. University of the Aegean, Department of Business Administration, 8 Michalon, Str., 82100 Chios, Greece;2. University of Peloponnese, Department of Economics, Greece;1. Associate Professor, College of Business, Department of Economics, James Madison University, 421 Bluestone Dr., MSC 0204, ZSH 442, Harrisonburg, VA 22807, United States;2. Associate Professor, Department of Economics, University of Wisconsin-Milwaukee, Box 413, Bolton Hall 806, Milwaukee, WI 53201, USA;3. Associate Professor, Department of Economics, Northeastern University, 301 Lake Hall, Boston, Massachusetts, 02115, USA;1. Indian Institute of Technology Kanpur, Kanpur, UP 208016, India;2. School of Business, Western Sydney University, Locked Bag 1797, Penrith, NSW 2751, Australia |
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| Abstract: | This paper examines the co-movement dynamics of ten emerging and four frontier government bond markets with the US market and the impact of macroeconomic factors and global bond market uncertainty on the time-varying co-movement. We find that macroeconomic factors play important role in explaining time variations in the bond return co-movement. Specifically, domestic macroeconomic factors have higher relative importance than global factors, with domestic monetary policy and domestic inflationary environment identified as the most influential factors. The global bond market uncertainty, based on an implied volatility measure, has explanatory power in driving co-movement dynamics in emerging and frontier bond markets. |
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