Paserman Presents Research on the Effect of Corruption on Bond Prices
Dr. Michal Paserman, assistant professor of finance, presented her research at four leading conferences in the fields of behavioural finance and experimental economics. The conferences included the NIBS 2015 Workshop in Nottingham, The First Israel Behavioural Finance Conference in Tel Aviv, Experimental Finance 2015 in Nijmegen and the Behavioural Finance Working Group in London.
Dr. Paserman studies the role corruption plays in the cost of foreign capital faced by emerging markets under different market conditions. She shows that the sensitivity of sovereign bonds issued by countries perceived as more corrupt to systematic shocks, increases during financial crises. The prices of bonds issued by less corrupt countries are determined more idiosyncratically when investor sentiment deteriorates, and realize more hedging benefits against the S&P 500 risk.
Paserman’s findings have important implications for global financial stability and portfolio management. Furthermore, her work suggests that by reducing corruption, emerging markets could benefit from global integration while decreasing potential side effects of sudden capital outflows during crises.