Hedge Funds and the Asian Currency Crisis of 1997

Stephen J. Brown, William N. Goetzmann, James Park

NBER Working Paper No. 6427
Issued in February 1998
NBER Program(s):Asset Pricing

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.

download in pdf format
   (938 K)

email paper

A non-technical summary of this paper is available in the October 1998 NBER digest.  You can sign up to receive the NBER Digest by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w6427

Published: 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.

Users who downloaded this paper also downloaded* these:
Burnside, Eichenbaum, and Rebelo w6758 Prospective Deficits and the Asian Currency Crisis
Radelet and Sachs w6680 The Onset of the East Asian Financial Crisis
Chan, Getmansky, Haas, and Lo w11200 Systemic Risk and Hedge Funds
Corsetti, Pesenti, and Roubini w6833 What Caused the Asian Currency and Financial Crisis? Part I: A Macroeconomic Overview
Brown and Goetzmann w8173 Hedge Funds With Style
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us