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What triggers market jitters? A chronicle of the Asian crisis, Volume 1
 
Author:Kaminsky, Graciela L.; Schmukler, Sergio L.; Collection Title:Policy, Research working paper ; no. WPS 2094
Country:East Asia and Pacific; Date Stored:1999/06/03
Document Date:1999/04/30Document Type:Policy Research Working Paper
SubTopics:Environmental Economics & Policies; Economic Theory & Research; Payment Systems & Infrastructure; Markets and Market Access; Access to Markets; Financial IntermediationLanguage:English
Major Sector:FinanceRegion:East Asia and Pacific
Report Number:WPS2094Sub Sectors:Other Finance
Volume No:1  

Summary: In the chaotic financial environment of East Asia in 1997-98, daily changes in stock prices of as much as 10 percent became commonplace. The authors analyze what type of news moved the market in those days of extreme market jitters. They find that movements are triggered by both local and neighbor-country news. News about agreements with international organizations and credit rating agencies have the most weight. Some of those large changes in stock prices, however, cannot be explained by any apparent substantial news but seem to be driven by herd instincts in the market itself. On average, the one-day market rallies are sustained with the largest one-day losses are recovered - suggesting that investors overreact to bad news.

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