Fundamental bond weighting boosts returns in emerging markets.
The study looked at how different ways of choosing which government bonds to invest in affect risk and returns. They found that using fundamental factors like economic health can lead to better returns in emerging and frontier markets. In developed markets, fundamental weighting only works well when not hedging against currency risks. This suggests that economic factors are more important for currency returns than bond returns. Overall, using fundamental factors can help investors make better decisions when investing in government bonds.