Did markets react efficiently to the 1994 Mexican peso crisis? Evidence from Mexican ADRS

Ike Mathur, Kimberly C. Gleason, Manohar Singh

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

The capital markets' reaction to the 1994 Mexican peso crisis is examined in this paper. The transmission of news from the Mexican market to the US market is examined by using a sample of 29 Mexican ADRs trading in the US. Using event study methodology in a multivariate regression setting, we show that information is transmitted efficiently from one market to the other. The regression of the US dollar returns on the Mexican IPC Index on the dollar returns of a portfolio of Mexican ADRs trading in the US does not show any significant arbitrage opportunities on the event dates used in the study. However, excess returns are observed in the period subsequent to the event dates when the market model is used as the return generating process with the US index as the market index. This result indicates the possibility of deriving excess returns associated with trading the Mexican ADRs in days subsequent to the news disclosures. When both the US and the Mexican indices are employed simultaneously, both indices are significant in explaining returns on the Mexican ADR portfolio.

Original languageEnglish (US)
Pages (from-to)39-48
Number of pages10
JournalJournal of Multinational Financial Management
Volume8
Issue number1
StatePublished - Jan 1 1998

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News
Excess returns
Market reaction
Event study methodology
Market model
Capital markets
Disclosure
Market index
Arbitrage
Multivariate regression

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

Mathur, Ike ; Gleason, Kimberly C. ; Singh, Manohar. / Did markets react efficiently to the 1994 Mexican peso crisis? Evidence from Mexican ADRS. In: Journal of Multinational Financial Management. 1998 ; Vol. 8, No. 1. pp. 39-48.
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Did markets react efficiently to the 1994 Mexican peso crisis? Evidence from Mexican ADRS. / Mathur, Ike; Gleason, Kimberly C.; Singh, Manohar.

In: Journal of Multinational Financial Management, Vol. 8, No. 1, 01.01.1998, p. 39-48.

Research output: Contribution to journalArticle

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