Credit risk analysis for developing country bond portfolios

In this article, the author uses a subset of a developing county's macroeconomic variables to create a concise default risk profile. Using z-scores for the variables eo adjust the country's dollar-denominated bond yield spreads over U.S. Treasuries, a simple risk/return ranking is obtained. The author finds that a portfolio of Brady bonds based on these rankings significantly outperforms the Brady Index since the index's inception.