Stephen J. Brown, William N. Goetzmann, James M Park
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.
Subject: Investments/International Finance (Empirical)
Brown: (212)998-0306 sbrown@stern.nyu.edu
http://www.stern.nyu.edu/~sbrown/sbrown.html
Goetzmann: (203) 432-5950 william.goetzmann@yale.edu
http://www.viking.som.yale.edu/
Park: (212) 271-3388 jp@paradigmcompanies.com
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