The Asian Crisis: What Did Local Stock Markets Expect?

21 Pages Posted: 27 Jan 2009

See all articles by Jacob Gyntelberg

Jacob Gyntelberg

Nordea Group; University of Copenhagen - Department of Economics

Alicia García-Herrero

Natixis ; BBVA Research; Bruegel

Andrea Tesei

Bank for International Settlements (BIS)

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2008


In this paper we investigate whether cross-sectional information from local equity markets contained information on devaluation expectations during the Asian crisis. We concentrate on the information content of equity prices as these markets were in general the largest and most liquid at the time and, thus, presumably the best carriers of information. Using an event-study approach for the period leading up to each of the devaluations which occurred during the Asian crisis (namely those of Indonesia, Korea, Malaysia, the Philippines and Thailand), we compare returns in the equity prices of exporting and non-exporting firms. This is based on the assumption that the expectation of a devaluation should help the stock of exporting firms outperform those of non-exporting firms. Overall we do find some evidence supporting this hypothesis, although at different degrees depending on the country. Our second finding is that local equity market prices, as reflected in the different patterns seen for exporters and non-exporters, did to at least to some extent price in the possibility that the Thai devaluation would be followed by other countries in the region.

Keywords: Asian crisis, currency crisis, information content of local equity prices

JEL Classification: F31, G15, G14

Suggested Citation

Gyntelberg, Jacob and Garcia-Herrero, Alicia and Tesei, Andrea, The Asian Crisis: What Did Local Stock Markets Expect? (September 1, 2008). BIS Working Paper No. 261. Available at SSRN: or

Jacob Gyntelberg (Contact Author)

Nordea Group ( email )

Grønjordsvej 10
Copenhagen, DK - 2300

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5, Bygn 26
Copenhagen, 1353

Alicia Garcia-Herrero

Natixis ( email )


BBVA Research ( email )

C/ Azul,4. Edificio La Vela. Planta 4
Madrid, 28050

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium

Andrea Tesei

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002

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