TY  - JOUR
AU  - Burger,John D.
AU  - Warnock,Francis E.
TI  - Foreign Participation in Local Currency Bond Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12548
PY  - 2006
Y2  - October 2006
UR  - http://www.nber.org/papers/w12548
L1  - http://www.nber.org/papers/w12548.pdf
N1  - Author contact info:
John D.. Burger
Loyola University Maryland
4501 N. Charles Street
Baltimore MD 21210-2699
E-Mail: jburger@loyola.edu

Francis E. Warnock
Darden Business School
University of Virginia
Charlottesville, VA 22906-6550
Tel: 434/924-6076
Fax: 434/243-8945
E-Mail: warnockf@darden.virginia.edu
AB  - Countries that cannot attract foreigners to invest in their local currency bonds run the risk of currency mismatches that can result in painful crises.  We analyze foreign participation in the bond markets of over 40 countries.  Bond markets in less developed countries have returns characterized by high variance and negative skewness, factors that we show are eschewed by U.S. investors.  While results based on a three-moment CAPM indicate that it is diversifiable idiosyncratic risk that U.S. investors shun, our analysis suggests that countries can improve foreign participation by reducing macroeconomic instability.
ER  -