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Investing in emerging market local currency debt

Author

Listed:
  • Benoît Mercereau

    (Sinopia Asset Management)

  • Alexandra Lubomira Sowa

Abstract

Emerging market government debt in local currency is a fast growing asset class. The asset class is new and it therefore offers attractive opportunities for active management. Good data and relatively stable economies make quantitative models for local currency debt reasonable. We suggest a valuation model for local currency debt. The model relates long-term interest rates to economic fundamentals. Our model explains emerging market interest rates reasonably well. An investment strategy based on the model seems promising. Our results suggest that models are useful for investing in emerging market local currency debt.

Suggested Citation

  • Benoît Mercereau & Alexandra Lubomira Sowa, 2008. "Investing in emerging market local currency debt," Journal of Asset Management, Palgrave Macmillan, vol. 9(1), pages 41-48, May.
    • Handle: RePEc:pal:assmgt:v:9:y:2008:i:1:d:10.1057_jam.2008.2
    DOI: 10.1057/jam.2008.2
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    References listed on IDEAS

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    1. Dailami, Mansoor & Masson, Paul R. & Padou, Jean Jose, 2008. "Global monetary conditions versus country-specific factors in the determination of emerging market debt spreads," Journal of International Money and Finance, Elsevier, vol. 27(8), pages 1325-1336, December.
    2. Gergana Jostova, 2006. "Predictability in Emerging Sovereign Debt Markets," The Journal of Business, University of Chicago Press, vol. 79(2), pages 527-566, March.
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