An Analysis of the Impact of Selected Factors on the Bond Market

Blanka Francová
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Blanka Francová: Department of Economics, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2018, vol. 66, issue 6, 1451-1458

Abstract: Exchange rate risk is important factor for the valuation of capital asset on international markets. According to the International Arbitrage Pricing Theory currency movements affect the prices of capital assets and associated risk premiums. The International Arbitrage Pricing Theory is based on total return of asset decomposition to non-currency return and currency return. The currency return is defined by exchange rate risk and the non-currency return is defined by factors affecting the price of capital assets. We propose an empirical model to apply this theory using corporate bonds. Using a rich dataset from Morningstar in the period 2001-2017 we employ the linear regression analysis method OLS with fixed effects. We apply the model for different bond yields and different time-series. The factors influence bond price differently for each yield and each time-series. Our results confirm that currency movements significantly affect the bond prices.

Keywords: pricing bonds; exchange rate; interest rate; inflation (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:mup:actaun:actaun_2018066061451

DOI: 10.11118/actaun201866061451

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