Cepni, OguzhanGul, SelcukGupta, Rangan2019-08-122019-08-122020-03Cepni, O., Gul, S. & Gupta, R. 2020, 'Local currency bond risk premia of emerging markets : the role of local and global factors', Finance Research Letters, vol. 33, art. 101183, pp. 1-7.1544-6123 (print)1544-6131 (online)10.1016/j.frl.2019.05.001http://hdl.handle.net/2263/71076This paper investigates the sources of variation in emerging market (EM) local currency bond risk premium. Empirical results suggest that both global and local factors contain valuable information in explaining the local currency bond excess returns. We show that economic policy uncertainty causes the excess bond returns to increase while positive innovations in the term spread, CP factor and implied FX volatility have downward impacts on the excess returns. Besides, the high level of spillover from developed markets to EMs may confine the diversification benefits from holding EM local currency bonds.en© 2019 Elsevier Inc. All rights reserved. Notice : this is the author’s version of a work that was accepted for publication in Finance Research Letters. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. A definitive version was subsequently published in Finance Research Letters, vol. 33, art. 101183, pp. 1-7, 2020. doi : 10.1016/j.frl.2019.05.001.Emerging marketPanel VARDynamic factor modelLocal currency bond risk premiumEmerging marketsPreprint Article