A recent paper recommends that investors allocate some of their money to emerging market bond funds. Some people say that risk should be taken only with the equity portion of one's portfolio, but I don't agree. Why should junk bond funds, for example, be excluded entirely from tax-deferred portfolios?
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34961Emerging Market Bond Funds: A Comprehensive AnalysisSIRAPAT POLWITOON Sigmund Weis School of Business, Susquehanna University ORANEE TAWATNUNTACHAI Pennsylvania State University - School of Business Administration The Financial Review, Vol. 43, No. 1, February 2008 Abstract: We analyze U.S.-based emerging market bond funds over a ten-year (1996-2005) complete cycle of ups and downs in the dominant emerging bond markets. Emerging market bond funds outperform comparable domestic and global bond funds. The results are robust across both conditional and unconditional models. The funds also provide international diversification benefits to U.S. and international bond and equity portfolios. The funds exhibit persistence in performance and seasonality. Active funds, large funds and funds with high minimum purchases perform better on a total return basis but not on a risk- adjusted basis. Keywords: Emerging markets, bond mutual funds, international diversification, international mutual funds, performance persistence JEL Classifications: G11, G12, G15