The Dynamics of Emerging Markets Hedge Funds Exposures During the Asian Currency Crisis of 1997

GLOBAL STOCK MARKETS AND PORTFOLIO MANAGMENT, Sima Motamen-Samadian, ed., Palgrave Macmillan Publisher, 2006

Posted: 21 Apr 2006 Last revised: 15 Sep 2009

Guillaume Monarcha

Orion Financial Partners

Date Written: 2006

Abstract

Using the TASS database, we aim to study 26 emerging markets hedge funds' behaviour during the Asian currency crisis of 1997.

In the first part of our work, we develop a multifactor model in order to estimate emerging markets hedge funds' exposures during the February 1995 - December 1999 period. Factors included in the model are returns from bond, equity and currency indices. Using a stepwise selection procedure, we find that all of the 26 funds exhibit positive and low leveraged exposure to emerging equity factors (Latin America, Asia and Eastern Europe equity indices) and heterogeneous significant exposure to other factors.

In a second part, we use the random walk version of the Kalman filter in order to estimate emerging markets hedge funds time varying exposures. We then analyse the coefficients' dynamics during the Asian currency crisis of 1997. We find that, following the crisis, most hedge funds that exhibited significant exposure to the Asian factors decreased their exposures. Furthermore, we find that many funds that were exposed to Latin American and Eastern European factors reacted to the crisis, whether they exhibited Asian factors' exposure or not. These reactions are quite heterogeneous, and occur after the month of June 1997.

Keywords: Hedge Funds, Emerging Markets, Asian Crisis, Kalman Filter

JEL Classification: G10, G15, G18, G23

Suggested Citation

Monarcha, Guillaume, The Dynamics of Emerging Markets Hedge Funds Exposures During the Asian Currency Crisis of 1997 (2006). GLOBAL STOCK MARKETS AND PORTFOLIO MANAGMENT, Sima Motamen-Samadian, ed., Palgrave Macmillan Publisher, 2006. Available at SSRN: https://ssrn.com/abstract=896701

Guillaume Monarcha (Contact Author)

Orion Financial Partners ( email )

54-56 avenue Hoche
Paris, 75008
France

Paper statistics

Abstract Views
1,084