Template-Type: ReDIF-Paper 1.0
Author-Name: Swinkels, L.A.P.
Author-Name-Last: Swinkels
Author-Name-First: Laurens
Author-Person: psw2
Title: Emerging Markets Inflation-Linked Bonds
Abstract: We investigate the added value of inflation-linked bonds in an investment portfolio. Recently, several studies questioned the added value of inflation-linked bonds based on empirical analyses on developed markets. We extend the cross-section of countries with a set of nine emerging markets and conclude that for many of these countries the inclusion of inflation linked bonds improves the risk-return characteristics of investment portfolios. We also document that inflation-linked bond returns correlate more with realized inflation than nominal bonds, even on the short run. Hence, investors that invest in nominal bonds and equities should also allocate a significant amount to inflation-linked bonds. Furthermore, our mean-variance spanning tests indicate that US investors that already invest in emerging markets nominal bonds and emerging markets equities benefit from adding emerging markets inflation-linked bonds to their investment portfolio.
Creation-Date: 2012-02-28
Series: RePEc:ems:eureri
Number: ERS-2012-004-F&A
Keywords: allocation, bonds, emerging debt, emerging markets, fixed income, inflation
Handle: RePEc:ems:eureri:31879