Developing a new bond index for the local market

Abstract

The main objective of this dissertation is to construct bond indices for the local market, given that at present the Maltese bond market doesn't have an index to track bonds' performance. The need for bond indices of the local market is to provide local and foreign investors with a better understanding of the local bonds‟ performance. Moreover, investors can be able to compare returns with other bonds indices and observe the performance of the local bond market in relation with other indices. Having a bond index may attract more foreign investors as it will be easier to apprehend the local bond market performance. The research outcome concludes that, overall, the local bond indices portray similar characteristics to European bond indices. However European bond indices always performed superior to local bond indices. It was also concluded that comparing local government and corporate bonds indices, there is a positive relation. Moreover, both government and local bonds performed better than the local share index.