Volatility Transmission in Asian Bond Markets: Tests of Portfolio Diversification |
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Authors: | JENIFER PIESSE NITAWAN ISRASENA COLIN THIRTLE |
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Affiliation: | 1. King's College London and University of Stellenbosch , RSA jenifer.piesse@kcl.ac.uk;3. Deloitte Touche Tohmatsu , Bangkok, Thailand;4. Centre for Environmental Policy , Imperial College London and University of Pretoria , RSA |
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Abstract: | The 1997 Asian crisis illustrated the need to develop local bond markets to reduce vulnerabilities to future mismatches in currency and maturity. This article examines a regional initiative – the Pan-Asian Bond Index Fund – and tests the implications for portfolio diversification. Intra- and inter-regional transmission of bond market volatilities between Hong Kong, Singapore and South Korea and from the United States and Japan is investigated. The results show that since Hong Kong and Singapore are highly integrated into global capital markets, the prospects of diversification of investment become undermined. The study provides evidence to assist policy makers in designing bond-index funds as a strategy for portfolio diversification to promote regional bond markets. |
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Keywords: | Asia bond-index funds East Asian bond markets Global international financial markets |
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