Depositary Receipts, Country Funds, and the Peso Crash: The Intraday Evidence |
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| Authors: | Warren Bailey Kalok Chan & Y Peter Chung |
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| Institution: | Cornell University,;Hong Kong University of Science and Technology,;University of California, Riverside |
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| Abstract: | We study the intraday impact of exchange rate news on emerging market American Depositary Receipts (ADRs) and closed-end country funds during the 1994 Mexican peso crisis. Peso exchange-rate changes affect prices and trading volumes of Latin American equities, and some closed-end fund behavior is consistent with "noise trader" theories of small investors. However, there is no evidence that peso depreciation triggers a significant sell-off of non-Mexican securities or that other non-Mexican trading patterns change at times of high peso news flow. Thus, the "Tequila Effect" is largely confined to price changes. |
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