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A Study on Global Investors’ Criteria for Investment in the Local Currency Bond Markets Using AHP Methods: The Case of the Republic of Korea

by Jae Young Jang 1,2,* and Min Jae Park 1
1
Seoul Business School, aSSIST, 46 Ewhayeodae 2-gil, Seodaemun-gu, Seoul 03767, Korea
2
BSL Business School Lausanne, Rte. de la Maladière 21, P.O. Box, 1022 Chavannes (VD), Switzerland
*
Author to whom correspondence should be addressed.
Risks 2019, 7(4), 101; https://doi.org/10.3390/risks7040101
Received: 2 September 2019 / Revised: 17 September 2019 / Accepted: 23 September 2019 / Published: 1 October 2019
(This article belongs to the Special Issue Measuring and Modelling Financial Risk and Derivatives)
Global investors’ investment in local currency bonds, especially Korea Treasury Bonds, has increased significantly since the mid-2000s, and their influence on bonds and financial markets has grown consistently. In this paper, we investigate global investor’s priority of decision factors in investing in Korea Treasury Bonds by distributing a pairwise comparative survey to experts and analyzing the results using the analytical hierarchy process technique. For analysis, we created model frames with experts in the field of investment based on literature analysis, selected survey participants by considering their institution of their employment, work experience and region, and obtained responses. We find that investors with short-term investment propensities are more sensitive to international and domestic factors and less to risk factors, and more heavily influenced by U.S. dollar funding conditions. On the other hand, investors with long-term investment tendencies are found to be more sensitive to international and risk factors as opposed to domestic factors, and influenced by: global policy rate decisions and fiscal soundness, sovereign credit rating, possible global economic recession, and geographical risks. Our findings not only contribute to enhancing investors’ understanding of the Korean bond market by discussing consensus among investors, but also provide policy implications for Korean government policymakers who need stable and sustained funding. View Full-Text
Keywords: local currency bond markets; Korea Treasury Bonds (KTBs); global investor’s consensus; investment decision; financing risk management; analytical hierarchy process (AHP) local currency bond markets; Korea Treasury Bonds (KTBs); global investor’s consensus; investment decision; financing risk management; analytical hierarchy process (AHP)
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Jang, J.Y.; Park, M.J. A Study on Global Investors’ Criteria for Investment in the Local Currency Bond Markets Using AHP Methods: The Case of the Republic of Korea. Risks 2019, 7, 101.

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