Dynamics of bond market integration between established and accession European Union countries

Kim, Suk-Joong; Lucey, Brian M.; Wu, Eliza

doi:10.1016/j.intfin.2004.12.004

Cited by 69 publications

(31 citation statements)

References 36 publications

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“…The finding is also consistent with the time-varying properties of bond correlations in literature which indicates correlations are not consistent across time (for e.g. Cappiello et al (2006), Hunter and Simon (2005), Kim et al (2006) andCiner (2007)). More importantly, the results are consistent with Hansson et al (2009) who, using a sample of bond indices from 11 developed countries and 10 emerging markets, had concluded that although correlations have increased in developed markets over time during [1997][1998][1999][2000][2001][2002][2003][2004][2005][2006], the emerging market debts within both government and corporate bonds still offer lower correlations.…”

Section: International Portfolio Diversificationsupporting

confidence: 88%

“…However, the correlations remain significantly below (absolute) one, indicating that the benefits of international bond diversification have not been eroded over the sample period. Kim et al (2006) use government bond index data and also show that there are time-varying linkages and convergence between the Euro-zone markets and Germany.…”

Section: Portfolio Diversification Of Bondsmentioning

confidence: 99%

“…As a result, more recent papers examine asset returns to identify shifting patterns in correlations between markets which then have an impact on portfolio diversification strategies (for e.g. Hunter and Simon (2005), Kim et al (2006), Cappiello et al (2006), Ciner (2007), Hansson et al (2009), etc. ).…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Does a Held-to-Maturity Strategy Impede Effective Portfolio Diversification for Islamic Bond (Sukuk) Portfolios? A Multi-Scale Continuous Wavelet Correlation Analysis

Najeeb

Bacha

Masih

2016

Emerging Markets Finance and Trade

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The Islamic bonds or sukuk market is one of the fastest growing segments of the nearly US$2trillion global Islamic finance industry. However, lack of trading in secondary sukuk markets is a peculiar feature in this sector and both institutional and retail sukuk investors are known to adopt a held-to-maturity investment strategy. Consequently, there is a critical gap in literature in studying the portfolio diversification opportunities available to sukuk investors and evaluating these in the light of held-to-maturity strategies. This paper (using recently available data and continuous wavelet transform methodologies) has made an initial attempt to study the portfolio diversification strategies for Islamic bond (sukuk) portfolios across heterogeneous investment horizons using the Malaysian and the Gulf Cooperation Council (GCC) sukuk markets as a case study. Our findings critically indicate that returns between local currency sukuk in different markets have low levels of long-term correlations, thus enabling portfolio diversification benefits. However, international currency sukuk issued in different markets exhibit high levels of long-term correlations which impede portfolio diversification benefits for held-to-maturity investments. A similar impediment is also witnessed in the domestic market context where diversification is intended by investing in different types of domestic sukuk. Overall, our findings critically highlight the feasibility of held-to-maturity sukuk investment strategies from a portfolio diversification perspective.

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Section: International Portfolio Diversificationsupporting

confidence: 88%

Section: Portfolio Diversification Of Bondsmentioning

confidence: 99%

See 1 more Smart Citation

Does a Held-to-Maturity Strategy Impede Effective Portfolio Diversification for Islamic Bond (Sukuk) Portfolios? A Multi-Scale Continuous Wavelet Correlation Analysis

Najeeb

Bacha

Masih

2016

Emerging Markets Finance and Trade

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“…A higher average value indicates a better standing or lower sovereign risk. Sovereign credit ratings are a valuable source of information and have been used as a basis to measure sovereign risk, for example, by Eichengreen et al (2003), Borio 7 and Packer (2004), Kim and Wu (2006), Remolona et al (2008b), andBissoondoyal-Bheenick et al (2011).…”

mentioning

confidence: 99%

Financial stability in Europe: Banking and sovereign risk

Brůha

Kočenda

2018

Journal of Financial Stability

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We analyze the link between banking sector quality and sovereign risk in the whole European Union over 1999-2014. We employ four different indicators of sovereign risk (including market-and opinion-based assessments), a rich set of theoretically and empirically motivated banking sector characteristics, and a Bayesian inference in panel estimation as a methodology. We show that a higher proportion of non-performing loans is the single most influential sectorspecific variable that is associated with increased sovereign risk. The sector's depth provides mixed results. The stability (capital adequacy ratio) and size (TBA) of the industry are linked to lower sovereign risk in general. Foreign bank penetration and competition (a more diversified structure of the industry) are linked to lower sovereign risk. Our results also support the wakeup call hypothesis in that markets re-appraised a number of banking sector-related issues in the pricing of sovereign risk after the onset of the sovereign crisis in Europe. JEL-Codes: C230, E580, F150, G210, G280, H630. Terms of use: Documents in

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“…3. The detachment of long-term equilibrium yields from government bonds in Europe has been widely attributed to a successful convergence of bond yields during the period preceding the euro inception and extending until the recent global financial crisis (Codogno et al, 2003;Côté/Graham, 2004;Kim, et al, 2006), as shown in our Fig. 1a.…”

Section: Literature Survey On Causal Interactions Between Macroecomentioning

confidence: 80%

Sovereign Default Risk in the Euro-Periphery and the Euro-Candidate Countries

Gabrisch¹,

Orłowski

Pusch³

2012

SSRN Journal

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Abstract:This study examines the key drivers of sovereign default risk in five euro area periphery countries and three euro-candidates that are currently pursuing independent monetary policies. We argue that the recent proliferation of sovereign risk premiums stems from both domestic and international sources. We focus on contagion effects of external financial crisis on sovereign risk premiums in these countries, arguing that the countries with weak fundamentals and fragile financial institutions are particularly vulnerable to such effects. The domestic fiscal vulnerabilities include: economic recession, less efficient government spending and a rising public debt. External 'push' factors entail increasing liquidity-and counter-party risks in international banking, as well as risk-hedging appetites of international investors embedded in local currency depreciation against the US Dollar. We develop a model capturing the internal and external determinants of sovereign risk premiums and test for the examined country groups. The results lead us to caution against premature fiscal consolidation in the aftermath of the global economic crisis, since such policy might actually worsen sovereign default risk. The model works well for the euro-periphery countries; it is less robust for the euro-candidates that upon a future euro adoption will have to pursue real economy growth oriented policies in order to mitigate a potential increase in sovereign default risk.

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Dynamics of bond market integration between established and accession European Union countries

Cited by 69 publications

References 36 publications

Does a Held-to-Maturity Strategy Impede Effective Portfolio Diversification for Islamic Bond (Sukuk) Portfolios? A Multi-Scale Continuous Wavelet Correlation Analysis

Does a Held-to-Maturity Strategy Impede Effective Portfolio Diversification for Islamic Bond (Sukuk) Portfolios? A Multi-Scale Continuous Wavelet Correlation Analysis

Financial stability in Europe: Banking and sovereign risk

Sovereign Default Risk in the Euro-Periphery and the Euro-Candidate Countries

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