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Revisiting The Determinants Of Sovereign Bond Yield Volatility

Carlos Alberto Piscarreta Pinto Ferreira

No 2022/0241, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: Although there is an extensive literature regarding volatility in the financial markets, to our knowledge, few empirical studies specifically focus on the drivers of volatility of sovereign bond yields. This empirical paper aims to fill part of this gap and to provide more up to date empirical insights. We add to previous work by examining the issue simultaneously in a broad number of advanced economies. Our analysis shows that sovereign bond unconditional volatility exhibits mean-reversion and persistence. Bond yield volatility responds to proximate market movements and global risk. However, that response is found to be uneven across geographies, asymmetric in some cases and possibly time-varying. Macro and policy uncertainty impact depends on the specific uncertainty measures used and rarely is very meaningful.

Keywords: Volatility; Bond Market; Public Debt; Sovereign Risk; Panel Data; Fixed Effects (search for similar items in EconPapers)
JEL-codes: C23 E44 G11 G15 H63 (search for similar items in EconPapers)
Date: 2022-07
New Economics Papers: this item is included in nep-fdg, nep-fmk, nep-ifn and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:ise:remwps:wp02412022

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