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Hedge Funds and the Asian Currency Crisis of 1997

Stephen J. Brown
NYU Stern School of Business

William N. Goetzmann
Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

James M. Park
PARADIGM Capital Management


February 1998

NBER Working Paper No. W6427

Abstract:     
We test the hypothesis that hedge funds were responsible for the crash in the Asian currencies in late 1997 . To do so, we develop estimates of the changing positions of the largest ten currency funds in one currency, the Malaysian ringgit and to a basket of Asian currencies. Our methodology is adapted from the Sharpe's (1992) style analysis approach that decomposes fund returns. We find that the net long or short positions in the ringgit or its correlates did fluctuate dramatically over the last four years. However, these fluctuations were not associated with moves in the exchange rates. The estimated net positions of the major funds were not unusual during the crash period, nor were the profits of the funds during the crisis. In sum, we find no empirical evidence to support the hypothesis that George Soros, or any other hedge fund manager was responsible for the crisis.

Working Paper Series

Date posted: September 05, 2000 ; Last revised: April 07, 2008

Suggested Citation

Brown, Stephen J., Goetzmann, William N. and Park, James M., Hedge Funds and the Asian Currency Crisis of 1997 (February 1998). NBER Working Paper No. W6427. Available at SSRN: http://ssrn.com/abstract=226174


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Contact Information

Stephen J. Brown (Contact Author)
NYU Stern School of Business ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0306 (Phone)
212-995-4233 (Fax)
William N. Goetzmann
Yale School of Management - International Center for Finance ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-432-8931 (Fax)
HOME PAGE: http://viking.som.yale.edu
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
James M. Park
PARADIGM Capital Management ( email )
12 East 49th Street, 32nd floor
New York, NY 10017
United States
212-271-3388 (Phone)
212-271-3393 (Fax)
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