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Latin American Corporate Emerging Markets Bond Indices (CEMBIs): Their recent evolution

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  • López-Herrera, Francisco
  • Santillán-Salgado, Roberto J.
  • Cabello, Alejandra

Abstract

This paper studies the stochastic relationship among six Latin American countries' international bond issue risk premium. The analysis exploits a novel Corporate Emerging Markets Bond Indices (CEMBIs) database processed with a VAR-CCC model to clarify the nature of such relationships, and makes an objective interpretation of their characteristics. The countries included in the sample are Argentina, Brazil, Chile, Colombia, Mexico and Peru, and the daily observations period from May 14, 2014, through February 9, 2017. Our findings indicate that the CEMBI returns of Brazil and Mexico are the main influencers on the behavior of the other Latin American CEMBI returns. These insights are valuable to understand the diversification possibilities of CEMBI portfolios, and of interest to Latin American corporate financial managers who consider financing their firms with international bond issues, and for whom the risk premium paid by bond issues is the cost of funding.

Suggested Citation

  • López-Herrera, Francisco & Santillán-Salgado, Roberto J. & Cabello, Alejandra, 2019. "Latin American Corporate Emerging Markets Bond Indices (CEMBIs): Their recent evolution," Global Finance Journal, Elsevier, vol. 41(C), pages 104-112.
    • Handle: RePEc:eee:glofin:v:41:y:2019:i:c:p:104-112
    DOI: 10.1016/j.gfj.2019.03.002
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    Cited by:

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    2. Lorenzo Menna & Martín Tobal, 2021. "Communication of Credit Rating Agencies and Financial Markets," Working Papers 80, Red Nacional de Investigadores en Economía (RedNIE).

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    More about this item

    Keywords

    Emerging markets bonds; Risk premium; Corporate Emerging Market Bond Index (CEMBI); Latin American corporate bonds issues;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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