Non-residents' Bond Market Share Reduces Yields and Volatility by 35%
The study looked at how different types of investors affect government bond markets in Colombia from 2006 to 2018. They found that when non-residents invest more, bond yields decrease by 35% and volatility goes down by 0.8%. On the other hand, pension funds and the banking sector have the opposite effect on bond yields. Also, when the market is dominated by a few investors, local bond yields become more sensitive to global financial shocks.