The predictability of excess returns in the emerging bond markets

Yin Feng Gau, Wen Ju Liao

Research output: Contribution to journalArticlepeer-review


This study examines the relationships that exist between excess bond returns and global and country-specific factors, focusing on a sample of 12 developing countries. Our results show a significantly negative autocorrelation with regard to the excess returns of bonds in the emerging markets; with growth in the size of the local bond market, there is a corresponding increase in the excess bond returns. For most of the developing economies, with an increase in emerging market bond returns, there are discernible reductions in the level of domestic interest rate and increases in the volatility of bond returns. A higher sovereign bond spread predicts higher excess returns for emerging market bonds. Overall, we find that world factors have relatively less predictive power in the emerging market bonds.

Original languageEnglish
Pages (from-to)1429-1451
Number of pages23
JournalApplied Financial Economics
Issue number17
StatePublished - Sep 2012


  • emerging market bonds
  • foreign capital flow
  • predictability


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