Abstract

http://ssrn.com/abstract=896701
 
 

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The Dynamics of Emerging Markets Hedge Funds Exposures During the Asian Currency Crisis of 1997


Guillaume Monarcha


Orion Financial Partners

2006

GLOBAL STOCK MARKETS AND PORTFOLIO MANAGMENT, Sima Motamen-Samadian, ed., Palgrave Macmillan Publisher, 2006

Abstract:     
Using the TASS database, we aim to study 26 emerging markets hedge funds' behaviour during the Asian currency crisis of 1997.

In the first part of our work, we develop a multifactor model in order to estimate emerging markets hedge funds' exposures during the February 1995 - December 1999 period. Factors included in the model are returns from bond, equity and currency indices. Using a stepwise selection procedure, we find that all of the 26 funds exhibit positive and low leveraged exposure to emerging equity factors (Latin America, Asia and Eastern Europe equity indices) and heterogeneous significant exposure to other factors.

In a second part, we use the random walk version of the Kalman filter in order to estimate emerging markets hedge funds time varying exposures. We then analyse the coefficients' dynamics during the Asian currency crisis of 1997. We find that, following the crisis, most hedge funds that exhibited significant exposure to the Asian factors decreased their exposures. Furthermore, we find that many funds that were exposed to Latin American and Eastern European factors reacted to the crisis, whether they exhibited Asian factors' exposure or not. These reactions are quite heterogeneous, and occur after the month of June 1997.

Keywords: Hedge Funds, Emerging Markets, Asian Crisis, Kalman Filter

JEL Classification: G10, G15, G18, G23

Accepted Paper Series


Not Available For Download

Date posted: April 21, 2006 ; Last revised: September 15, 2009

Suggested Citation

Monarcha, Guillaume, The Dynamics of Emerging Markets Hedge Funds Exposures During the Asian Currency Crisis of 1997 (2006). GLOBAL STOCK MARKETS AND PORTFOLIO MANAGMENT, Sima Motamen-Samadian, ed., Palgrave Macmillan Publisher, 2006. Available at SSRN: http://ssrn.com/abstract=896701

Contact Information

Guillaume Monarcha (Contact Author)
Orion Financial Partners ( email )
54-56 avenue Hoche
Paris, 75008
France
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