Capturing short-term and long-term alpha of global bond portfolios: evidence from EUR-investors’ perspective
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The main focus of this paper is the managerial skill or alpha of global bond funds. Analysis of the global bond market shows that both currency and bond-related returns are an integral part of the global fixed-income exposure. The present work deals with regression-based style analysis and other established methods in the bulk of finance journals literature, using both currency and fixed-income factors, and investigates the alpha of the globally invested fixed-income portfolios. There is empirical evidence that, between May 2007 and January 2015, global bond funds delivered significantly positive alpha. There is also an indication that periods of depreciation of the basis currency of the funds (EUR) improves fund performance, and market turmoil and negative events destroy alpha. During the Euro crisis and Fed tapering, the funds generated sustainable positive excess alpha. A division of the sample into two sub-samples gives more insight into the excess return. Additional robustness estimations deliver qualitatively similar results.
KeywordsGlobal fixed-income funds Currencies Mutual funds Style analysis Time-series regressions Alpha
JEL ClassificationF21 F31 G12 G15
I acknowledge the anonymous referee for helpful comments and suggestions. I am grateful to Prof. Dr. O. Loistl and Prof. Dr. C. Casey for their insightful and constructive criticism.
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