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International Monetary Fund. External Relations Dept.

As a result of the globalization of today’s world financial markets, global capital flows are increasing rapidly, and asset classes and investor types are becoming more diverse. Many of these developments have been driven by a broadening investor base, financial liberalization, and technological innovations, enabling investors to diversify into new markets and new instruments, according to the IMF’s most recent Global Financial Stability Report . The diversity of assets, source countries, and investor types suggests that this form of globalization should

Mr. Jochen R. Andritzky and Julian Schumacher
Sovereign debt restructurings are perceived as inflicting large losses to bondholders. However, many bonds feature high coupons and often exhibit strong post-crisis recoveries. To account for these aspects, we analyze the long-term returns of sovereign bonds during 32 crises since 1998, taking into account losses from bond exchanges as well as profits before and after such events. We show that the average excess return over risk-free rates in crises with debt restructuring is not significantly lower than the return on bonds in crises without restructuring. Returns differ considerably depending on the investment strategy: Investors who sell during crises fare much worse than buy-and-hold investors or investors entering the market upon signs of distress
Mr. Jochen R. Andritzky and Julian Schumacher

type 5. Cross-sectional determinants of bond-by-bond returns List of Figures 1. Types of crises 2. Cumulative returns by crisis resolution type 3. Returns during full sample period 4. Returns during crisis episodes 5. Returns during crisis episodes by length of investment period 6. Total crisis-episode return against change in NPV from restructuring 7. Stylized investment periods by investor type 8. Excess returns for constrained and distress investors during crisis episodes