Date of Publication

2017

Document Type

Master's Thesis

Degree Name

Master of Science in Financial Engineering

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management Department

Thesis Adviser

Mari Toni Bautista

Defense Panel Chair

Patrick D. Caoile

Defense Panel Member

Tomas S. Tiu
Patricia P. Benito

Abstract/Summary

The present research investigated the dynamics of Republic of the Philippines (ROP) sovereign bond spread movements as influenced by various country-specific and global explanatory variables from period 2006 to 2016 using the fixed effects estimation model. To account for the regime shifts during the period, Markov-switching regression (SWARCH) model was conducted on CBOE Volatility Index (VIX), the variable representing global risk aversion.

The explanatory variables were first regressed on the J.P. Morgans Emerging Market Bond Index Global (EMBIG) spreads of the Philippines, Indonesia and Malaysia and found that global explanatory variables were the main drivers of spreads across different regimes. The variables in addition of trading cost liquidity dimension were then regressed on specific ROP spreads. Results showed that country-specific factors such as GDP and CPI outlook, reserves and credit rating changes are significant drivers of bond spread movement but the significance of each differ for each regime.

Forecasts were obtained using the significant coefficients and evaluation using the Root Mean Squared Error (RMSE) and Mean Percentage Absolute Error (MAPE) showed that the model performed slightly better than baseline regression.

Abstract Format

html

Language

English

Format

Electronic

Accession Number

CDTG007746

Shelf Location

Archives, The Learning Commons, 12F Henry Sy Sr. Hall

Keywords

Bonds; Bond market

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