Hedge Funds and the Asian Currency Crisis

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Abstract
The authors test the performance of a number of global hedge funds over a four–year period in order to determine whether they could have been responsible for the crash in the Asian currencies in 1997. They use Sharpe's style analysis to measure the variations in the historical exposure of these funds to Asian currencies leading up to the crisis. The results indicate that fund profits were not generally positive during the crisis, nor were funds' estimated exposures to Asian currencies unusual. Consequently, the authors find no empirical evidence to support the hypothesis that George Soros, or any other hedge fund manager, was responsible for the crisis. Style analysis suggests that global managers actively vary their exposures to currencies, but over the period 1993 through 1997 these fluctuations were not found to be associated with moves in exchange rates.

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