This paper examines key determinants of the distance between the sovereign's credit rating and the ratings of sub-sovereign foreign currency bonds, such as bond issuers' type, debt characteristics, and global and country's economic conditions. Using a comprehensive international bond-level...

We show that internationally diversified portfolios carry sizeable political risk premia. We use a tail-risk portfolio selection model to obtain political efficient frontiers from skewed return distributions and manage political risk, and design an inference test to draw conclusions. We find...

We examine in a unified framework three recent perspectives on country risk: debt intolerance, original sin, and currency mismatches. We find statistical evidence supporting aspects of all three, though the strength of that support varies considerably across hypotheses and a number of open...

This paper analyzes if the so called home country bias exists in sovereign ratings: Home country bias could be due to the fact that a rating agency applies higher ratings to a country with which the country where the rating agency is located has stronger relations. For the analysis of a...

This paper analyzes if and what kind of sovereign rating bias exists. We analyze three possible biases. Firstly, rating agencies may have the incentive to rate countries where they earn more money better compared to countries where they earn less (profit maximizing bias). Secondly, different...

Since the onset of the eurozone sovereign debt crisis, credit risk spreads in Europe have diverged. Despite this divergence, credit risk comoves strongly within certain country groups such as the eurozone periphery. We seek to answer what the determinants of the observed pattern of credit risk...

In this paper we study the sovereign credit rating determinants of Visegrad Four countries in the period 1993-2012. The sovereign ratings in this study come from four major credit rating agencies namely Moody's, S&P, Fitch and R&I. Besides macroeconomic and socio-political indicators we analyse...

This paper examines the relationship between sovereign credit ratings and FDI flows from 31 OECD donor countries to 72 recipient (OECD and non-OECD) countries over the period of 1985-2012. There are three main findings in the paper. First, sovereign credit ratings of donor and recipient are...

To explore the propagation of shocks across markets, this paper examines the dynamic connections between three distinct markets: credit default swaps (CDS), equities, and cross-currency basis swaps (CCBS) of four major individual economies: Eurozone, UK, Australia, and Japan. We use CDS spreads,...

This paper analyzes the impact of bilateral investment treaties (BITs) on sovereign bond returns of 25 emerging markets from 1993 to 2016. Under a BIT, foreign investors can use an international arbitration scheme to enforce compensation claims against the domestic government in case of direct...