RT Journal Article
SR Electronic
T1 Errors and Challenges Associated with Investing in EMU Government Bonds
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP jpm.2023.1.481
DO 10.3905/jpm.2023.1.481
A1 Gueorgui S. Konstantinov
YR 2023
UL https://pm-research.com/content/early/2023/03/15/jpm.2023.1.481.abstract
AB This article highlights some of the main practical errors and challenges associated with investing in Economic and Monetary Union (EMU) government bonds and the difficulties in implementing EMU government bond strategies. These challenges refer to both portfolio allocation and to factor bond portfolios. Different country economic fundamentals, central bank policy, market timing, market risks, model and management risks, liquidity, and idiosyncratic country risks as well as spillover effects should be considered when investing in individual EMU government bonds. These essential properties of EMU bonds are not adequately addressed in portfolio allocation models (e.g., the tracking error or the mean–variance optimization) applied to single bond portfolios from equity investing. The main EMU government bond disparities are associated with country risks, which can be generalized to the main difference between core and periphery country yield spreads.