Title: The global and regional factors in the volatility of emerging sovereign bond markets
Authors: Thanh Huong Dinh, Duc Khuong Nguyen
Addresses: Institute of Research in Management, University of Paris XII Val-de-Marne, 61 Avenue du General de Gaulle, 94010 Creteil cedex, France. ' Department of Economics, Finance and Law, ISC Paris School of Management, 22 Boulevard du Fort de Vaux, 75017 Paris cedex, France
Abstract: This paper examines how much the volatility of sovereign bond markets in emerging Latin American countries is influenced by the volatility shocks to global and regional markets. After estimating the Generalised AutoRegressive Conditional Heteroscedasticity (GARCH)-based conditional volatility for sample markets, we measure the parts of sovereign bond market volatility that are attributable to the global and regional factors within the dynamic framework of a Structural Vector Autoregressive (SVAR) model. We find significant and persistent volatility spillovers from the global and regional factors to sovereign bond markets, with a dominant effect issued by the global sovereign bond market. We also find evidence that the global and regional markets are, on average, responsible for more than 45% of the variance of volatility changes in three of the five selected emerging countries over a 12-week forecast horizon.
Keywords: emerging market debt; structural vector autoregressive; SVAR models; volatility spillovers; sovereign bond markets; Latin America; market volatility.
American Journal of Finance and Accounting, 2008 Vol.1 No.1, pp.52 - 68
Published online: 13 Aug 2008 *Full-text access for editors Access for subscribers Purchase this article Comment on this article