THE ASIAN CRISIS AND MARKET EFFICIENCY: A DIFFERENT PERSPECTIVE

• Main Authors: Raj Aroskar, Peggy Swanson
• Format: Article
• Language: English
• Published: People & Global Business Association (P&GBA) 2002-09-01
• Series: Global Business and Finance Review
• Subjects: asian crisis; market efficiency; foreign exchange markets
• Online Access: http://www.gbfrjournal.org/pds/journal/thesis/20150624163350-9FO5E.pdf

This paper investigates the effects ofthe 1997 Asian financial market crisis on the efficiency offoreign exchange markets for the Indonesian rupiah, Philippine peso, Malaysian ringgit, Thai baht, and Korean won. Based on a crisis and a non-crisis period, indications o f inefficiency are found via one cointegrating vector during the crisis period, but minimal evidence of inefficiency is found during the non-crisis period. Additional efficiency tests, however, reveal that random walk tests dominate error correction models in predictive ability during the crisis period. Thus evidence ofinefficiency is diminished and inefficiencies in foreign exchange markets do not appear to be a significant problem during either periods of relative calm or periods ofextreme volatility.