Positive asymmetric information in volatile environments: The black market dollar and sovereign bond yields in Venezuela

Julio Sarmiento; Edgardo Cayon; María Collazos; Juan S. Sandoval

doi:10.1016/j.ribaf.2017.04.047

Positive asymmetric information in volatile environments: The black market dollar and sovereign bond yields in Venezuela

Julio Sarmiento, Edgardo Cayon, María Collazos, Juan S. Sandoval

Research output: Contribution to journal › Article › peer-review

1 Scopus citations

Abstract

Purpose We test the informational efficiency of Venezuelan USD sovereign bond yields when the black market exchange-rate premium (BMERP) changes. Design We use a non-parametric, asymmetric, Granger causality test to test our hypothesis. Findings We find that the bond market with less than or equal to 5 years of maturity seems to be efficient when good news is released on the BMERP. However, this market is not informationally efficient, and when combined with unbiased bad news regarding the BMERP, arbitrage opportunities are created. Originality/value Capital controls that restrict free exchange-rate mechanisms create arbitrage opportunities with negative news as opposed to positive news.

Original language	English
Pages (from-to)	547-555
Number of pages	9
Journal	Research in International Business and Finance
Volume	41
DOIs	https://doi.org/10.1016/j.ribaf.2017.04.047
State	Published - Oct 2017

Keywords

Black markets exchange rate
Sovereign bonds
Venezuela

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10.1016/j.ribaf.2017.04.047

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title = "Positive asymmetric information in volatile environments: The black market dollar and sovereign bond yields in Venezuela",

abstract = "Purpose We test the informational efficiency of Venezuelan USD sovereign bond yields when the black market exchange-rate premium (BMERP) changes. Design We use a non-parametric, asymmetric, Granger causality test to test our hypothesis. Findings We find that the bond market with less than or equal to 5 years of maturity seems to be efficient when good news is released on the BMERP. However, this market is not informationally efficient, and when combined with unbiased bad news regarding the BMERP, arbitrage opportunities are created. Originality/value Capital controls that restrict free exchange-rate mechanisms create arbitrage opportunities with negative news as opposed to positive news.",

keywords = "Black markets exchange rate, Sovereign bonds, Venezuela",

author = "Julio Sarmiento and Edgardo Cayon and Mar{\'i}a Collazos and Sandoval, {Juan S.}",

note = "Publisher Copyright: {\textcopyright} 2017 Elsevier B.V.",

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language = "English",

volume = "41",

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T1 - Positive asymmetric information in volatile environments

T2 - The black market dollar and sovereign bond yields in Venezuela

AU - Sarmiento, Julio

AU - Cayon, Edgardo

AU - Collazos, María

AU - Sandoval, Juan S.

PY - 2017/10

Y1 - 2017/10

N2 - Purpose We test the informational efficiency of Venezuelan USD sovereign bond yields when the black market exchange-rate premium (BMERP) changes. Design We use a non-parametric, asymmetric, Granger causality test to test our hypothesis. Findings We find that the bond market with less than or equal to 5 years of maturity seems to be efficient when good news is released on the BMERP. However, this market is not informationally efficient, and when combined with unbiased bad news regarding the BMERP, arbitrage opportunities are created. Originality/value Capital controls that restrict free exchange-rate mechanisms create arbitrage opportunities with negative news as opposed to positive news.

AB - Purpose We test the informational efficiency of Venezuelan USD sovereign bond yields when the black market exchange-rate premium (BMERP) changes. Design We use a non-parametric, asymmetric, Granger causality test to test our hypothesis. Findings We find that the bond market with less than or equal to 5 years of maturity seems to be efficient when good news is released on the BMERP. However, this market is not informationally efficient, and when combined with unbiased bad news regarding the BMERP, arbitrage opportunities are created. Originality/value Capital controls that restrict free exchange-rate mechanisms create arbitrage opportunities with negative news as opposed to positive news.

KW - Black markets exchange rate

KW - Sovereign bonds

KW - Venezuela

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M3 - Article

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SN - 0275-5319

VL - 41

SP - 547

EP - 555

JO - Research in International Business and Finance

JF - Research in International Business and Finance

ER -

Positive asymmetric information in volatile environments: The black market dollar and sovereign bond yields in Venezuela

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Keywords

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