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“Large” versus “Small” Players: A Closer Look at the Dynamics of Speculative Attacks

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  • Geir H. Bjønnes
  • Steinar Holden
  • Dagfinn Rime
  • Haakon O. Aa. Solheim

Abstract

What is the role of “large players” (e.g., hedge funds) in speculative attacks? Recent work suggests that large players move early to induce smaller agents to attack. However, many observers argue that large players move late in order to benefit from interest-rate differentials. We propose a model in which large players can do both. Using data on currency trading by foreign (large) and local (small) players, we find that foreign players moved last in three attacks on the Norwegian krone during the 1990s. During the attack on the Swedish krona after the Russian moratorium in 1998, foreign players moved early. Gains by delaying attack were small, however, because interest rates did not increase.

Suggested Citation

  • Geir H. Bjønnes & Steinar Holden & Dagfinn Rime & Haakon O. Aa. Solheim, 2014. "“Large” versus “Small” Players: A Closer Look at the Dynamics of Speculative Attacks," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(2), pages 506-538, April.
    • Handle: RePEc:bla:scandj:v:116:y:2014:i:2:p:506-538
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    File URL: http://hdl.handle.net/10.1111/sjoe.12044
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    Cited by:

    1. Sensoy, Ahmet & Serdengeçti, Süleyman, 2019. "Intraday volume-volatility nexus in the FX markets: Evidence from an emerging market," International Review of Financial Analysis, Elsevier, vol. 64(C), pages 1-12.
    2. Juelsrud, Ragnar E., 2021. "Deposit concentration at financial intermediaries," Economics Letters, Elsevier, vol. 199(C).

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