The Asian Crisis: What Did Local Stock Markets Expect?

BIS Working Papers No. 261

BBVA Working Paper No. 0807

17 Pages Posted: 7 Sep 2009

See all articles by Alicia García-Herrero

Alicia García-Herrero

Natixis ; BBVA Research; Bruegel

Jacob Gyntelberg

Nordea Group; University of Copenhagen - Department of Economics

Andrea Tesei

Bank for International Settlements (BIS)

Multiple version iconThere are 2 versions of this paper

Date Written: February 10, 2009


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 devaluation should help the stock of exporting firms outperform those of nonexporting 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 nonexporters, 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 market prices

JEL Classification: F31, G15, G14

Suggested Citation

Garcia-Herrero, Alicia and Gyntelberg, Jacob and Tesei, Andrea, The Asian Crisis: What Did Local Stock Markets Expect? (February 10, 2009). BIS Working Papers No. 261. Available at SSRN:

BBVA Research ( email )

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

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium

Jacob Gyntelberg

Nordea Group ( email )

Grønjordsvej 10
Copenhagen, DK - 2300

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5, Bygn 26
Copenhagen, 1353

Andrea Tesei

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002

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