We analyze state-dependent and asymmetric behavior of emerging market (EM) sovereign bond spreads in response to changes in global risk appetite and liquidity. We use dynamic Markov-switching, fixed-effect panel threshold, and time-varying causality analyses along with our research setting....

We mathematically show that no matter how many factors are augmented to Capital Asset Pricing Model (CAPM), beta will always matter. We also show that augmenting additional factors to single-factor CAPM requires market risk premia to be modeled as time-varying. In addition to allowing a...