Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316655 
Year of Publication: 
2024
Citation: 
[Journal:] Journal of Asset Management [ISSN:] 1479-179X [Volume:] 25 [Issue:] 5 [Publisher:] Palgrave Macmillan [Place:] London [Year:] 2024 [Pages:] 479-492
Publisher: 
Palgrave Macmillan, London
Abstract: 
We examine the covariances of corporate bonds in emerging markets (EM) and present an asset pricing framework using instrumented principal component analysis (IPCA) that includes characteristics at the sovereign and bond levels. Our results indicate that EM bond returns are significantly influenced by country-specific risks. Incorporating these characteristics can improve both the total and cross-sectional model fit. We demonstrate that a factor framework tailored to the nuances of the EM universe generates a significant alpha of 2% per annum against the market and a higher information ratio than alternative asset pricing models, such as a conditional beta model designed for developed market (DM) bonds.
Subjects: 
Corporate bonds
Factor investing
Emerging markets
Country risk
JEL: 
G12
G17
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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