Monique Kwan now turns her attention to the likelihood of crises in various emerging market currencies. She discusses this matter with a research associate, who tells her that the historical record of currency crises shows that most of these episodes were not very well anticipated by investors (in terms of their positioning), by the bond markets (in terms of yield spreads between countries), or by major credit rating agencies and economists (in terms of the sovereign credit ratings or forecasts, respectively).
1) The research associate is most likely:
A. correct.
B. incorrect, because most credit rating agencies and economists typically changed their forecasts prior to a crisis.
C. incorrect, because investor positioning and international yield differentials typically shift prior to a crisis.