Expected returns, risk and the integration of international bond markets

By D. Barr, Richard Priestley. 2004

147 citations recorded by the source corpus.

In this paper we model expected risks and returns on government bonds, allowing for partial integration of national and world bond markets. Using a conditional asset pricing model that permits variation in the price of, and exposure to, risk, we find strong evidence that national markets are only partially integrated into world markets. Around one quarter of total expected excess returns is related to local market risk; the remainder being due to world bond market risk. A range of parameter stability tests rejects the hypothesis of time-variation in the level of integration.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/184e64df8741cb24205d105f0a174927f9432829

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Citations in the corpus

International Bond Risk Premia (2013, unknown): “Barr and Priestley (2004) study integration of international bond markets and find that around three quarters of local risk premia are due to global risk.”
EMU and European Government Bond Market Integration (2010, unknown): “Studies of this issue include Geyer, Kossmeier and Pischer (2004), Gómez-Puig (2009a and 2009b), and Pagano and Von Thadden (2004).”
Evolution of international stock and bond market integration: Influence of the European Monetary Union (2006, unknown): “In the asset pricing vein, Ilmanen (1995) and Barr and Priestley (2004) suggest that world stock and bond markets are largely segmented and that further understanding of their joint behaviour is needed.”
Did the S.A.R.S. epidemic weaken the integration of Asian stock markets? Evidence from smooth time-varying cointegration analysis (2018, background): “For this reason, recent studies have allowed integration to vary over time and with events (e.g., Aggarwal, Lucey & Muckley, 2003; Barr & Priestley, 2004).”