What Triggers Market Jitters; a Chronicle of the Asian Crisis

Journal of International Money and Finance, Vol. 18, pp. 537-560, 1999

Posted: 26 Apr 1999

See all articles by Graciela Kaminsky

Graciela Kaminsky

National Bureau of Economic Research (NBER); George Washington University - Department of Economics

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Abstract

Movements in stock prices in East Asia during the crisis in 1997-98 were triggered by both local and neighbor-country news. Having the highest impact was news about agreements with international organizations and credit rating agencies. But some changes seem to have been driven by herd instincts in the market itself, including overreactions to bad news. In the chaotic financial environment of East Asia in 1997-98, daily changes in stock prices of as much as 10 percent became commonplace. Kaminsky and Schmukler analyze what type of news moved the market in those days of extreme market jitters. They find that movements are triggered by both local and neighbor-country news. News about agreements with international organizations and credit rating agencies have the most weight. Some of those large changes in stock prices, however, cannot be explained by any apparent substantial news but seem to be driven by herd instincts in the market itself. On average, the one-day market rallies are sustained while the largest one-day losses are recovered - suggesting that investors overreact to bad news.

Note: This is a desciption of the paper and not the actual abstract.

JEL Classification: F0, F3, F4, G1

Suggested Citation

Kaminsky, Graciela and Schmukler, Sergio, What Triggers Market Jitters; a Chronicle of the Asian Crisis. Journal of International Money and Finance, Vol. 18, pp. 537-560, 1999. Available at SSRN: https://ssrn.com/abstract=160068

Graciela Kaminsky

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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George Washington University - Department of Economics ( email )

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202-994-6147 (Fax)

HOME PAGE: http://www.gracielakaminsky.com/

Sergio Schmukler (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN MC 3-301
Washington, DC 20433
United States
202-458-4167 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://www.worldbank.org/en/about/people/s/sergio-schmukler

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