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Not just the news: Higher moments of macroeconomic variables and sovereign bond returns

Year: 2025

Type: article

Abstract: Using sovereign debt data from 47 countries, we document that the third moment (skewness) of unemployment changes has a positive and significant relation with sovereign bond returns. Thus, while investors require risk premia for exposure to macroeconomic shocks (Campbell, 1996), we find that the skewness of unemployment changes contains information that helps to explain sovereign bond returns beyond the shocks to the unemployment rate. This relation holds for both dollar and local currency sovereign debt returns, and after controlling for the information content of news events. The relation is greater in economic expansions than in contractions.

Source: Global Finance Journal

DOI: 10.1016/j.gfj.2025.101113

Authors: Yulin Li, John K. Wald, Zijun Wang

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $2,860

OpenAlex ID: W4409726131

FWCI: 1.869

Cites: 63

Cited by: 2

Related to: 10