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Hedge Funds and the Asian Currency Crisis of 1997

30 Pages Posted: 11 Feb 1998  

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Stephen J. Brown

New York University - Stern School of Business

James M. Park

PARADIGM Capital Management

Multiple version iconThere are 3 versions of this paper

Date Written: May 13, 1998

Abstract

We test the hypothesis that hedge funds were responsible for the crash in the Asian currencies in late 1997. To do so, we develop estimates of the changing positions of the largest ten currency funds in one currency, the Malaysian ringgit and to a basket of Asian currencies. Our methodology is adapted from the Sharpe?s (1992) style analysis approach that decomposes fund returns. We find that the net long or short positions in the ringgit or its correlates did fluctuate dramatically over the last four years. However, these fluctuations were not associated with moves in the exchange rate. The estimated net positions of the major funds were not unusual during the crash period, nor were the profits of the funds during the crisis. In sum, we find no empirical evidence to support the hypothesis that George Soros, or any other hedge fund manager was responsible for the crisis.

JEL Classification: G2

Suggested Citation

Goetzmann, William N. and Brown, Stephen J. and Park, James M., Hedge Funds and the Asian Currency Crisis of 1997 (May 13, 1998). Yale School of Management Working Paper No. F-58. Available at SSRN: https://ssrn.com/abstract=58650 or http://dx.doi.org/10.2139/ssrn.58650

William Goetzmann (Contact Author)

Yale School of Management - International Center for Finance ( email )

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National Bureau of Economic Research (NBER)

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Stephen Brown

New York University - Stern School of Business ( email )

Stern School of Business
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James Park

PARADIGM Capital Management ( email )

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New York, NY 10017
United States
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212-271-3393 (Fax)

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