The International Debt Crisis and Bank Security Returns in 1982

This research investigates the reaction of bank security returns to the 20 August 1982 Mexican request for the rescheduling of its external debt. Empirical results show that the reaction of bank stocks was rapid and significantly negative. Within six days of the published announcem ent, prices had adjusted to reflect levels of individual bank exposure, which re futes the much longer time impliedin other studies of this event. The authors c onclude that the marketreaction was essentially efficient, rational, and orderly.