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Country Beta
Definition
The country beta is used in international bond investing. Specifically, it is used to measure the amount of duration contribution to a domestic portfolio by introducing a foreign bond to portfolio. It is found by regressing the amount yield change for a foreign bond vs. the amount of yield change for a domestic bond given a fixed movement in interest rates.
Using the term Country Beta :
If a bond issued in the U.K. has a duration of 6 and has a country beta relative to the U.S. of 0.9, then a U.S. manager would calculate the U.K. bond's duration contribution to the U.S. portfolio at 6 X 0.9 = 5.4
Pay Special Attention To :
The yield beta differences primarily derive from differences in the two country's currencies and interest rates. These factors may be volatile at times so frequent measurement of the country beta is important to monitor any changes that would require you to adjust your hedge.
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Related terms
Yield Beta
'Country Beta' appears in the definitions of these other terms:
Yield Beta
