Predicting Currency Fluctuations and Crises: Do Resident Firms Have an Informational Advantage?
33 Pages Posted: 15 Jan 2004
This paper investigates whether resident enterprise managers have an informational advantage about the countries where they work. We test this informational advantage hypothesis by using a unique dataset, the Global Competitiveness Survey. The findings suggest that local managers do have valuable information about the country where they reside. Local managers' responses improve conventional estimates of future volatility and changes in the exchange rate, which are based on economic fundamentals. These findings provide support to the theories that claim that asymmetric information is present in international financial markets and is important to understand financial crises.
Keywords: Expectations, asymmetric information, local investors, financial crises, exchange rates fluctuations, prediction, survey
JEL Classification: F3, F4, G1
Suggested Citation: Suggested Citation