TY - JOUR
T1 - International political risk and government bond pricing
AU - Huang, T.
AU - Wu, F.
AU - Yu, Jing
AU - Zhang, B.
PY - 2015/6
Y1 - 2015/6
N2 - © 2014 Elsevier B.V. This paper investigates the impact of international political risk on government bond yields in 34 debtor countries using a comprehensive database of 109 international political crises from 1988 through 2007. After employing the total number of international political crises as a proxy for political risk and controlling for country-specific economic conditions, we establish a positive and significant link between international political risk and government bond yields. This is consistent with global bond investors demanding higher returns at times of high political uncertainty. In addition, we show that international political risk has a reduced adverse effect on bond prices when the debtor country has a stable political system and strong investor protection.
AB - © 2014 Elsevier B.V. This paper investigates the impact of international political risk on government bond yields in 34 debtor countries using a comprehensive database of 109 international political crises from 1988 through 2007. After employing the total number of international political crises as a proxy for political risk and controlling for country-specific economic conditions, we establish a positive and significant link between international political risk and government bond yields. This is consistent with global bond investors demanding higher returns at times of high political uncertainty. In addition, we show that international political risk has a reduced adverse effect on bond prices when the debtor country has a stable political system and strong investor protection.
U2 - 10.1016/j.jbankfin.2014.08.003
DO - 10.1016/j.jbankfin.2014.08.003
M3 - Article
VL - 55
SP - 393
EP - 405
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
ER -