Audzeyeva, A and Fuertes, A-M (2018) On the predictability of emerging market sovereign credit spreads. Journal of International Money and Finance, 88. 140 - 157. ISSN 0261-5606

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Abstract

This paper examines the quarter-ahead out-of-sample predictability of Brazil, Mexico, the Philippines and Turkey credit spreads before and after the Lehman Brothers’ default. A model based on the country-specific credit spread curve factors predicts no better than the random walk and slope regression benchmarks. Model extensions with the global yield curve factors and with both global and domestic uncertainty indicators notably outperform both benchmarks post-Lehman. The finding that bond prices better reflect fundamental information after the Lehman Brothers’ failure indicates that this landmark of the recent global financial crisis had wake-up call effects on emerging market bond investors.

Item Type: Article
Additional Information: The final published version of this article is available online at https://www.sciencedirect.com/science/article/pii/S0261560618304509?via%3Dihub
Uncontrolled Keywords: Sovereign credit spreads; Emerging markets; Out-of-sample predictability; Term structure; Macroeconomic uncertainty
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
Divisions: Faculty of Humanities and Social Sciences > Keele Management School
Depositing User: Symplectic
Date Deposited: 08 Aug 2018 08:19
Last Modified: 24 Aug 2018 09:48
URI: http://eprints.keele.ac.uk/id/eprint/5206

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