Abstract
We use a Bayesian regime switching approach to examine the performance enhancement of adding US international bond funds to a domestic bond universe pre and post the Global Financial Crisis (GFC) during January 1999 and May 2022. We find that the international bond funds provide large significant performance enhancement pre the GFC, with an increase in Certainty Equivalent Return (CER) performance of 0.595% (monthly), but none post the GFC. The performance enhancement pre GFC is driven by Large Emerging Market bond funds, which is likely fueled by a substantial drop in the Emerging Market central bank policy rates pre GFC.
Original language | English |
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Pages (from-to) | 765-782 |
Number of pages | 18 |
Journal | Financial Review |
Volume | 58 |
Issue number | 4 |
Early online date | 3 Jun 2023 |
DOIs | |
Publication status | Published - 30 Nov 2023 |
Keywords
- U.S international bond funds
- Global Financial Crisis (GFC)
- bond portfolios