The Effect of Thailand's Political Uncertainty on the Volatility of Stock Market Exchange, Banking Industrial Equity and Business Sentiment

摘要

This study examine the impact of Thailand political uncertainty on the Thailand Stock Market Index (SET), the banking industrial equity index (BANK) and the Business Sentiment Index (BSI) volatility. Rely on GARCH methodology and use monthly time series data covering January 2011-March 2015, the results reveal significant impacts of political uncertainty to the volatility of SET, BANK and BSI by political events. Both SET and BANK have increased volatility after coup, unrest and violence occurring. It seems that stock market investors or indirect investors are more sensitive to political events with any violence. Another finding from this study confirms that the volatility of BANK has greater than the volatility of SET, it recommend that stock market investors should avoid to invest in banking industrial equity. Surprisingly, the result of the volatility of BSI has increased. As first, Thailand have a new Prime minister by single-party government and second, from military government by coup, it could imply that business persons have less confidence on economic policy dysfunctions, make them more insecurity and costly. Because the parliamentary dictatorship on single-party government and the military government can keep substantial power to influence economic policy and public is unable to verify the corruption and transparency. The outcomes of this research can contribute to helping global and domestic investors to formulate strategies to minimize their risk. Furthermore, policy administrators may bring the result of this research to inform macro and micro policy formulation.