کاهش ارزش پول و بازده بازار سهام در حال ظهور

Stock returns over the 2 years surrounding 24 currency devaluations are examined. Using bootstrapped distributions, returns preceding the devaluation are shown to be significantly below normal, in both dollar and local currency terms. Most of the downturn, however, occurs well before the month of the devaluation. Returns following a devaluation are normal. While industry and company specific effects appear to influence return behavior, only country effects and leverage levels are statistically significant. At the country level, both aggregate economic activity (GDP) and the size of the devaluation are important in explaining return behavior. The stock of foreign debt has little impact on returns. Finally, even though returns appear to anticipate devaluations, they are not statistically significant at predicting the size of the devaluation.

Large and discrete currency movements are not uncommon events in many emerging markets.1 When and why such events occur has been hotly debated among monetary and macroeconomists for many years.2 Exactly what impact these events have on the real and financial sectors of the underlying economies is less well studied. Conceptually, a devaluation should both increase inflation and stimulate economic activity through exports. In addition, by relaxing the constraints imposed on the monetary authorities, interest rates can be relaxed and liquidity increased. But these results are not always the case and devaluations are often followed by high interest rates and poor economic performance. Over the last two decades a number of emerging stock markets have developed as viable investment alternatives for international investors. While one can debate the various merits of these markets, one thing many of them have in common is exposure to the risk of a currency devaluation. For the foreign investor this risk is obvious because stocks are priced in local currency and any exchange rate change will pass through to stock returns. However, stock prices themselves reflect the value of the real assets underlying the shares and the impact of currency changes on these real assets is uncertain.3 This paper looks at stock market performance over a sample of 24 devaluation events covering 18 emerging market countries over the period 1980–1999. The analysis compares stock market performance before and after the devaluation event with the general distribution of returns for these markets. The paper also examines several factors that differentiate the performance of the markets. The findings suggest that devaluations have a significant negative impact on returns, both in dollar and local currency terms, in the months preceding the event. This impact is statistically significant on average, but there is also considerable variation across events and countries. The analysis suggests that market reaction following an event is closely tied to economic recovery and a more relaxed monetary environment. The remainder of the paper is organized as follows: Section 2 describes the country event data; Section 3 looks at the behavior of individual stocks during these events and Section 4 examines the links between country market behavior and the macroeconomy. 5 and 6 examine the ability of stock markets to predict devaluation size and longer-term behavior of markets prior to currency events, respectively. Conclusions and a summary are contained in the final section.

Large and relatively discrete currency movements are not uncommon in emerging markets. Despite this, we know little about the impact such currency movements have on stock markets. This paper examined 24 devaluation events and the long-term performance of stock returns. On average, while stock returns are reduced in the period leading up to a devaluation event, the period following these events is characterized by normal return behavior. There is considerable variation across events, however, and much of this variation can be explained by economic growth, the size of the devaluation, and the industry and country in which the event occurs. The real failure of this analysis is that it is unable to explain the reaction of markets prior to a devaluation event. What the evidence here shows is that the only significant reaction of stock markets to devaluations takes place in the 6 months leading up to the event, with all of that reaction having already concluded a month before the event month. The reaction is negative and none of the analysis presented here is very successful at explaining the cross-sectional variation observed in those reactions. For academics, that should be considered an invitation to further work. For practitioners, the lessons from this work are clear: know the country environment in which you invest. The evidence suggests that when the country environment is good, stock returns will also be good in spite of a currency event. Conversely, when the country environment is poor, trying to sit out the impact of a devaluation can be a long and painful process.