'Large' vs. 'Small' Players: A Closer Look at the Dynamics of Speculative Attacks

Geir Bjønnes, Steinar Holden, Dagfinn Rime and Haakon O.Aa. Solheim ()
Additional contact information
Haakon O.Aa. Solheim: Ministry of Trade and Industry

No 38, SIFR Research Report Series from Institute for Financial Research

Abstract: What is the role of "large players" like hedge funds and other highly leveraged institutions in speculative attacks? In recent theoretical work, large players may induce an attack by an early move, providing information to smaller agents. In contrast, many observers argue that large players are in the rear. We propose a model that allows both the large player to move early in order to induce speculation by small players, or wait so as to benefit from a high interest rate prior to the attack. Using data on net positions of "large" (foreigners) and "small" (locals) players, we find that large players moved last in three attacks on the Norwegian krone (NOK) during the 1990s: The ERM-crisis of 1992, the NoK-pressure in 1997, and after the Russian moratorium in 1998. In 1998 there was a contemporaneous attack on the Swedish krona (SEK) in which large players moved early. Interest rates did not increase in Sweden so there was little to gain by a delayed attack.

Keywords: Speculative attacks; Microstructure; International finance; Large players (search for similar items in EconPapers)
JEL-codes: F31 F41 G15 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2005-12-15
New Economics Papers: this item is included in nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sifr.org/PDFs/sifr-wp38.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Working Paper: 'Large' vs. 'Small' Players: A Closer Look at the Dynamics of Speculative Attacks (2009)
Working Paper: “Large” vs. “small” players: A closer look at the dynamics of speculative attacks (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:sifrwp:0038

Access Statistics for this paper

More papers in SIFR Research Report Series from Institute for Financial Research Institute for Financial Research Drottninggatan 89, SE-113 60 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Anki Helmer ().