Arbeitspapier

International capital flows and bond risk premia

This paper studies the impact of international capital flows on asset prices through risk premia. We investigate whether foreign purchases of U.S. Treasury securities significantly contributed to the decline in excess returns on long-term bonds between 1995 and 2008. We run forecasting regressions of realized excess returns on measures of net purchases of treasuries by both foreign official and private agents. We find a clear distinction in the effects of flows on excess returns. Official flows, with a negative and non-linear effect, appear similar to relative supply shocks; private net purchases, with a positive and linear effect, resemble flows that absorb excess supply and are thus compensated in equilibrium for this service, similar to the role of arbitrageurs in preferred-habitat models of the term structure.

Language
Englisch

Bibliographic citation
Series: Bank of Canada Working Paper ; No. 2010-14

Classification
Wirtschaft
Portfolio Choice; Investment Decisions
Asset Pricing; Trading Volume; Bond Interest Rates
International Financial Markets
Foreign Exchange
Current Account Adjustment; Short-term Capital Movements
International Lending and Debt Problems
Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
Subject
Financial markets
Internationaler Finanzmarkt
Kapitalmobilität
Kapitalanlage
Risikoprämie
Kapitalertrag
USA

Event
Geistige Schöpfung
(who)
Sierra, Jesus
Event
Veröffentlichung
(who)
Bank of Canada
(where)
Ottawa
(when)
2010

DOI
doi:10.34989/swp-2010-14
Handle
Last update
20.09.2024, 8:21 AM CEST

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Sierra, Jesus
  • Bank of Canada

Time of origin

  • 2010

Other Objects (12)