TY - JOUR
T1 - Exploring the benefits of international government bond portfolio diversification strategies
AU - Fletcher, Jonathan
AU - Paudyal, Krishna
AU - Santoso, Timbul
N1 - This is an Accepted Manuscript of an article published by Taylor & Francis in European Journal of Finance , available online: http://www.tandfonline.com/10.1080/1351847X.2018.1450279
PY - 2019/1/31
Y1 - 2019/1/31
N2 - We use the Bayesian approach of Wang(1998) to examine the diversification benefits of investing in international government bonds. We find that no short selling constraints substantially reduce but do not eliminate the diversification benefits when only investing in G7 government bonds with different maturities. There are significant diversification benefits when using the G7 bonds, an inflation-linked bond index, and emerging market bonds even in the presence of no short selling constraints. The superior performance is driven by the emerging markets bonds. We also find that the diversification benefits vary across different economic states.
AB - We use the Bayesian approach of Wang(1998) to examine the diversification benefits of investing in international government bonds. We find that no short selling constraints substantially reduce but do not eliminate the diversification benefits when only investing in G7 government bonds with different maturities. There are significant diversification benefits when using the G7 bonds, an inflation-linked bond index, and emerging market bonds even in the presence of no short selling constraints. The superior performance is driven by the emerging markets bonds. We also find that the diversification benefits vary across different economic states.
KW - international diversification,
KW - international government bonds
KW - Bayesian analysis
UR - https://www.tandfonline.com/loi/rejf20
U2 - 10.1080/1351847X.2018.1450279
DO - 10.1080/1351847X.2018.1450279
M3 - Article
SN - 1351-847X
VL - 25
SP - 1
EP - 15
JO - European Journal of Finance
JF - European Journal of Finance
IS - 1
ER -
