Hedge Funds and the Asian Currency Crisis of 1997
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 rates. 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.
|Date of creation:||Feb 1998|
|Date of revision:|
|Publication status:||published as Brown, Stephen J., William N. Goetzmann and James M. Park. "Hedge Funds And The Asian Currency Crisis," Journal of Portfolio Management, 2000, v26(4,Summer), 95-101.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Fung, William & Hsieh, David A, 1997. "Empirical Characteristics of Dynamic Trading Strategies: The Case of Hedge Funds," Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 275-302.
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