The Asian crisis: what did local stock markets expect?

In this paper we investigate whether cross-sectional information from local equity marketscontained information on devaluation expectations during the Asian crisis. We concentrate onthe information content of equity prices as these markets were in general the largest and mostliquid at the time and, thus, presumably the best carriers of information. Using an event-studyapproach for the period leading up to each of the devaluations which occurred during the Asiancrisis (namely those of Indonesia, Korea, Malaysia, the Philippines and Thailand), we comparereturns in the equity prices of exporting and non-exporting rms. This is based on the assumptionthat the expectation of a devaluation should help the stock of exporting rms outperform thoseof non-exporting rms. Overall we do nd some evidence..