The demand for emerging market bonds

We study the multi-period asset allocation problem for emerging market investors whose asset menu consists of stocks, bonds and bills. We consider two types of emerging market investors: domestic investors (with returns in local currency) and international investors who can invest in US and emerging markets assets (with returns in US dollars). In developed markets, long-term government bonds are often considered attractive investment options forrisk-averse investors. Our results show that emerging market bonds with a maturity of one year and longer can be attractive for domestic and international investors with different risk preferences, in both the short run and the long run.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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