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Bond market evidence of time variation in exposures to global risk factors and the role of US monetary policy

Thomas Nitschka

Journal of International Money and Finance, 2018, vol. 83, issue C, 44-54

Abstract: This paper empirically shows that US monetary policy influences present and future exposures of developed markets’ government bond returns to measures of global, systematic risk and thus affects the time variation of these returns. This finding highlights spillovers from US monetary policy to US dollar denominated foreign assets and to foreign assets denominated in other currencies than the US dollar. From an asset pricing perspective, the evidence reveals that exchange rate risk and time variation in sensitivities to global bond market and exchange rate risk are important to describe time variation in developed markets’ government bond returns.

Keywords: Bond return; Global CAPM; Monetary policy; Risk factors; Spillover (search for similar items in EconPapers)
JEL-codes: E52 G10 G15 (search for similar items in EconPapers)
Date: 2018
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