A consultant suggests that the weighted-average portfolio duration calculation for a global bond portfolio is the same as for a domestic bond portfolio.
a. State whether the use of portfolio duration in international bond portfolio management is more limiting than in domestic bond portfolio management. Support your conclusion with two reasons.
The consultant recognizes that currency, duration, and investing outside the benchmark are possible sources of excess return in global bond management. He is also curious about additional methods of adding value through global bond management.
b. List and discuss two additional potential sources of excess return.