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Fundamental indexation for developed, emerging, and frontier government bond markets

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  • Vanja Piljak

    (University of Vaasa)

  • Laurens Swinkels

    (Erasmus University Rotterdam)

Abstract

We examine the risk and return characteristics of fundamental weighting schemes for developed, emerging, and frontier government bond markets and compare these to market-capitalization-weighted indexes. We document positive excess returns for the investment grade sample only when currency risks are not hedged, suggesting that fundamentals might be more important for currency rather than bond returns. For emerging and frontier markets, we find positive excess returns for fundamental weighting schemes, although not always statistically significant. The excess returns from fundamental weighting schemes for government bonds can be explained by standard factors from equity, currency, or bond markets.

Suggested Citation

  • Vanja Piljak & Laurens Swinkels, 2017. "Fundamental indexation for developed, emerging, and frontier government bond markets," Journal of Asset Management, Palgrave Macmillan, vol. 18(5), pages 405-420, September.
    • Handle: RePEc:pal:assmgt:v:18:y:2017:i:5:d:10.1057_s41260-017-0045-8
    DOI: 10.1057/s41260-017-0045-8
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    References listed on IDEAS

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    5. David Blitz & Laurens Swinkels, 2008. "Fundamental indexation: An active value strategy in disguise," Journal of Asset Management, Palgrave Macmillan, vol. 9(4), pages 264-269, October.
    6. Barroso, Pedro & Santa-Clara, Pedro, 2015. "Beyond the Carry Trade: Optimal Currency Portfolios," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 50(5), pages 1037-1056, October.
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    Cited by:

    1. Dimic, Nebojsa & Piljak, Vanja & Swinkels, Laurens & Vulanovic, Milos, 2021. "The structure and degree of dependence in government bond markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).

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