Using company-level data, this paper examines the relative stock-market performance of firms with different foreign-exchange exposures around the time of the 1994/95 Mexican crisis. Contrary to what one might have expected given the alleged peso overvaluation, exporting firms outperformed the market beginning in late 1993. Although interest rates fail to show a clear confidence loss in the exchange rate regime, the relative performance of net exporters suggests that expectations of devaluation increased continuously. The methodology presented is relevant beyond the Mexican case: sectoral differences in stock market performance may constitute valuable leading indicators of exchange rate changes in emerging markets.Company-level data on exports and intermediate imports for non-financial firms were obtained from a database ... The Mexican Stock Exchange (BMV) collects similar information on exports, but no data on imports were available for 1994.
|Title||:||Devaluation Expectations and the Stock Market - The Case of Mexico in 1994/95|
|Author||:||Törbjörn I. Becker, Gaston Gelos, Anthony J. Richards|
|Publisher||:||International Monetary Fund - 2000-01-01|