Institutional quality: Another brick in the wall of the determinants of debt investment

Motivated by the negative yields in the market, we explore the possibility of a cross country payment of a premium for having money in an institutionally safer place. Using data on the portfolio investment from 78 countries in 208 countries during 10 years, and defining an innovative measure of institutional quality based on the World Governance Indicators, we study the statistical relationship between institutions and debt markets. Departing from a mean-variance allocation setting, we find that institutional quality matters when talking about attracting debt portfolio investment between countries, even though this allocation shows to be persistent over time