We investigate correlation dynamics and diversification properties of US dollar-denominated debt issued by governments of frontier markets. Our analysis is on the aggregate, regional, and country level, with a sample covering 29 countries over the period 2001–2013. We show that the correlation between the returns of frontier government bond markets and US government bonds is time-varying, but on average close to zero. Correlations with US investment grade corporate bonds, US corporate high yield bonds, and US dollar-denominated debt issued by governments of emerging markets are substantially higher, which limits diversification benefits for investors who already own these asset classes.

Additional Metadata
Keywords Bonds, Diversification, Emerging markets, Frontier markets
Persistent URL dx.doi.org/10.1016/j.ememar.2015.10.002, hdl.handle.net/1765/98870
Journal Emerging Markets Review
Citation
Piljak, V. (Vanja), & Swinkels, L.A.P. (2017). Frontier and emerging government bond markets. Emerging Markets Review, 30, 232–255. doi:10.1016/j.ememar.2015.10.002