Foreign Participation in Local Currency Bond Markets / John D. Burger, Francis E. Warnock.

Format:

Book

Author/Creator:

Burger, John D.

Contributor:

National Bureau of Economic Research.

Warnock, Francis E.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12548.

NBER working paper series no. w12548

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

Countries that cannot attract foreigners to invest in their local currency bonds run the risk of currency mismatches that can result in painful crises. We analyze foreign participation in the bond markets of over 40 countries. Bond markets in less developed countries have returns characterized by high variance and negative skewness, factors that we show are eschewed by U.S. investors. While results based on a three-moment CAPM indicate that it is diversifiable idiosyncratic risk that U.S. investors shun, our analysis suggests that countries can improve foreign participation by reducing macroeconomic instability.

Notes:

Print version record

October 2006.