Thai Stock Market Research Articles

Firm attributes, earnings management, and anti-corruption activities in Thai-listed firms

The Thailand Stock Exchange Commission now requires listed firms to disclose their anti-corruption activities to the public. We explore the unique Thai approach to corruption in three steps. First we study the relationship between anti-corruption activities and firm attributes. Second, we examine the relationship between anti-corruption activities and the quality of earnings. Lastly, we investigate whether the reporting of anti-corruption activity conveys new information to the Thai stock market. The results indicate that firms with superior performance attributes and good corporate governance have higher levels of anti-corruption progress. Earnings management is greater for firms with low levels of anti-corruption progress. We also find evidence that anti-corruption announcements are associated with significant market reactions. This suggests that anti-corruption announcements contain new information that investors consider relevant for firm values.

Firm attributes, earnings management, and anti-corruption activities in Thai-listed firms

The Thailand Stock Exchange Commission now requires listed firms to disclose their anti-corruption activities to the public. We explore the unique Thai approach to corruption in three steps. First we study the relationship between anti-corruption activities and firm attributes. Second, we examine the relationship between anti-corruption activities and the quality of earnings. Lastly, we investigate whether the reporting of anti-corruption activity conveys new information to the Thai stock market. The results indicate that firms with superior performance attributes and good corporate governance have higher levels of anti-corruption progress. Earnings management is greater for firms with low levels of anti-corruption progress. We also find evidence that anti-corruption announcements are associated with significant market reactions. This suggests that anti-corruption announcements contain new information that investors consider relevant for firm values.

Volatility of holiday effects in Thai stock market

This paper aims to examine the volatility of holiday effects on Thai stock market. The holiday effect is phenomenon in which high returns could be found around the holiday. The event provided new insight about the weak-form efficiency in the market. The SET index were collected five day daily data from the 1st January 1992 until 31st December 2016. The size of the data was 6,523 days. The holiday data were collected from 1992 to 2016. The holidays, announced by the Bank of Thailand, were 317 days along 25 years. This paper tested the holiday effect by using GARCH(1,1) model and EGARCH(1,1) model both of which are considered as appropriate for time series data. The result showed that there are statistically significant positive higher returns rate than normal days in both pre-holiday and post–holiday. Indeed, we found the abnormal positive returns in pre-holiday is higher than post–holiday at the significant level of 1%. Finally, we tested the model fit to data of two methods by using AIC and SIC. From the result it appeared that EGARCH(1,1) is more appropriate than GARCH(1,1).

Does overreaction still exist in Thailand?

Overreaction of stock prices is identified when investors give more credence to new information than its intrinsic value, thus driving stock prices away from the level at which they should be. This study aims to examine the overreaction hypothesis in Thailand in recent years, with the intention of suggesting investment strategies based on the results obtained. The final sample of 438 companies was collected from the period 1990 to 2016 and is categorised into two portfolios: loser portfolios, with the lowest past returns; and winner portfolios, with the highest past returns. Both equally-weighted and value-weighted methods are used to examine these two portfolios. The results show evidence of stock price overreaction on the Thai stock market, particularly during periods involving interesting situations, such as the Asian financial crisis of 1997, political chaos in 2005, and the global financial crisis in 2008–2009. Moreover, the contrarian strategy is preferred when investing in Thailand, as the loser portfolios reveal a reversed performance in the following period. However, when the value-weighted method is applied, evidence of overreaction is stronger. This indicates that larger stocks appear to overreact more in comparison to smaller ones. Thus, the size effect should be an interesting point to consider prior to making investment decisions in Thailand.

The Asian financial crisis: market inefficiency and speculative bubbles

A significant body of economic literature considers the collapse of Thailand's financial market as one of the causes of the Asian financial crisis during the years 1997-1998. The phenomenon subsequently raises the question of whether the stock market of Thailand at the time was working efficiently or characterised substantially by speculative bubbles. Empirical tests are, however, rare. The present study revisits the 1997 Asian financial crisis and empirically investigates the presence of market inefficiency and speculative bubbles in the Thai stock market using monthly data spanning January 1985 to December 1998. A variety of contemporary econometric tests provide substantial evidence for the existence of market inefficiency, speculative bubbles and overvalued stocks in the Thai stock market during the Asian remarkable economic growth in the late 1980s and early 1990s. The findings also contribute to the scholarly research on this topic by offering additional insights into the anatomy and dynamic behaviour of Thai stock prices during the crisis episode.

Does market capitalization matters? Tests of weak-form efficient market hypothesis for Thai stock market

This study contributes to the literature of stock market efficiency by examining the weak-form efficient hypothesis for Thai stock market, especially after the subprime mortgage crisis in which the restricted financial policies issued by Thai government has been implemented. Thus, the full sample and sub-sample windows covering pre- and post-subprime financial crisis periods are investigated. The newly developed multiple variance ratio tests based on the wild bootstrap together with the Lo-MacKinlay and the Chow-Denning variance ratio tests are employed for testing the hypothesis. In addition, sub-indices based upon market capitalisation are categorised for further investigation on the impact of firm-sized on efficiency. The results reveal that, for the market level, the Stock Exchange of Thailand exhibits the market efficiency during the period of pre- and post-subprime mortgage crisis. For the sub-indices point of view, however, the small-capitalisation index provides some evidences against a weak-form efficiency.

Does market capitalisation matters? Tests of weak-form efficient market hypothesis for Thai stock market

Does market capitalisation matters? Tests of weak-form efficient market hypothesis for Thai stock market

Value Investing in the Stock Market of Thailand

Value investment and growth investment have attracted a large amount of research in recent decades, but most of this research focuses on the U.S. and Europe. This article covers the Thai stock market which has very different characteristics compared to western markets and even South East Asian countries such as Indonesia or Malaysia. Among South East Asian countries, Thailand has one of the most dynamic capital markets. In order to see if some well-known trends in other markets exist in Thailand the performance of value and growth stocks in the Thai market were analyzed for a period of 17 years using existing style indexes (MSCI) as well as creating portfolios using individual stocks. For this entire period, when using the indexes, returns are statistically significant superior for value stocks compared to growth stocks. However, when analyzing the performance of the market in any given calendar year from 1999 to 2016, the results are much more mixed with in fact growth stocks outperforming in several of those years. Interestingly, when building portfolios using criteria such as low P/E or low P/B the results are not statistically different. Suggesting perhaps that the classification into value or growth stocks is more complex than it would appear. One of the common assumptions of value investing is that those stocks outperform over long periods of time. It might well be that in the Thai case one year is not a long enough period for value stocks to outperform. While there have been some clear efforts over recent years to modernize the stock market of Thailand, it remains relatively underdeveloped, particularly when compared to markets such as the U.S. Hence, its behavior regarding value versus growth investment might be rather different.

Simultaneous relationship between performance and executive compensation of Thai non-financial firms

PurposeThe purpose of this paper is to determine the two-direction relationship between financial firm performance and executive compensation in Thai listed companies; that is, effect of firm performance on executive compensation and the effect of executive compensation on subsequent firm performance. In investigating the relationship, governance, firm-specific and human capital characteristics, which should influence on the pay-performance system, are also considered. This study helps to shape an understanding of the effectiveness of the incentive system in the Thai context.Design/methodology/approachThe System GMM, with concern about the endogeneity problem of the simultaneous relationship, is applied to examine the relationship between firm performance and executive compensation. The samples to investigate this relationship composed of 5,139 firm-years observations for 15 years from the years 2000 to 2014 of 432 non-financial firms in the Thai stock market.FindingsThe empirical evidence reveals simultaneous relationship between performance and executive compensation in Thai stock market. It shows that compensation of executives in Thai firms corresponds to firm performance, and compensation of executives leads to an improvement in subsequent performance of Thai listed firms. Moreover, some corporate governance mechanisms and human capital of executives also revealed their particular effects on setting of the pay for performance system in Thailand.Originality/valueThis study confirms that the pay for performance system is applicable in Thailand. Furthermore, the empirical results of this study highlight effects of some governance and human capital characteristics on setting of the pay-performance system. Thus, this study should be a part of the growing body of literature in this area.

Portfolio Choice toward Long-Term Mutual Funds in Thailand

After allowing long-term mutual fund to be used as expense for tax deduction in order to help promote investing in the Thai stock market, the Thai long-term mutual funds (LTF) have been rapidly grown. However, Thai government is now considering whether to suspend this policy. It becomes interesting how the suspension of this policy will affect the investment decision on the long-term mutual funds. This study intends to determine effect of the suspension of tax benefit of the long-term mutual fund applying behavior finance conceptual framework. The results from experimental survey data indicate that after suspension of tax benefit policy, investors will lower their investment on long-term mutual funds but invest in government bond instead.

Company Size Effect in the Stock Market of Thailand

The outperformance of small capitalization companies over large capitalization companies is a well-known occurrence in developed markets (Gorn, 1962), (Jacobs, 1989) with (Banz, 1981) numerically showing that this effect on stocks in the New York Stock Exchange. This phenomenon is based on the idea that some company specific characteristics can have a statistically significant impact on stock performance. The existence, or otherwise of this effect in emerging markets has received less attention. Given the very different characteristics of emerging markets compared to mature markets like the US is not immediately evident that the same conclusions can be extrapolated. One of the immediate clear differences between emerging and mature markets is the depth with markets like the US having a large amount of listed companies as well as large average trading volumes. In fact, when this analysis has been repeated in some emerging markets, such as Sri Lanka, the results seem to indicate that there is no statistically appreciable difference between the return of small and large capitalization stocks (Macn, 2013). It should be noted that in the case of the Sri Lanka case there were only, at the time of the article, 25 listed companies, of which only 12 were included in the analysis. The specific case of the stock market of Thailand is analyzed in this paper. The results of this article seem to point towards the existence of a size effect, affecting stock performance, in the Thai stock market. Some articles covering emerging market as a whole as pointed towards the opposite results. Given the substantial differences among emerging markets countries it is perhaps a better approach to follow an individualized analysis, country per country, rather than treat it as a homogenous group.

A Comparison of GARCH Models for Volatility Estimation of Returns on Securities in Resource Group of Thai Stock Market

The objectives of this study are to estimate volatility of returns on securities in ResourceGroup of Thai Stock Market using basic specifications of ARCH/GARCH/EGARCH model, and to measure skewness and kurtosis of the error term distribution from models selection.A test of ARCH Effect is performed in order to examine whether all data fitt with the ARCH family, and then ARCH (1, 1), GARCH (1,1) and EGARCH (1,1) are developed. A conditional variance equation from ARCH (1,1) is 2 0 1 1 2 t = + t− σ α α ε , and fromGARCH (1,1) is in a form 2 1 1 2 0 1 1 2 σ t = α +α at− + β σ t− and for EGARCH (1,1) is 1 1 1 2 1 1 2 ln( ) ln( ) − − − − = + − + + t t t t t t σ ε γ σ ε σ ω β σ α . The Akaike Criterion (AIC) and Schwarz criterion (SC) statisticsare used in model selection for non-nested alternatives-smaller values of the AIC and SC are preferred. For testing normality, a test statistic is Jarque-Bera and if the residual are normally distributed, the histogram should be bell-shaped and the Jarque-Bera statistic should not be significant, and if the null hypothesis is rejected, then innovation would be introduced through student’s t distribution. After all these steps, skewness and kurtosis are calculated in the study. Results of the study showed that 6 out of 30 securities data fitted with ARCH (1,1) model with insignificance statistical results which indicated that there must be a reconsideration of applying higher order of ARCHinstead of ARCH (1,1) model. There were 5 securities fitted with GARCH (1,1) model, with the same pattern, i.e., lower value for the coefficient of the ARCH term and higher value for the GARCH term which lead to a high fluctuations in GARCH. This finding indicated that the asset return was expectedly large in either the upward or the downward direction, and the estimation results indicated that GARCH (1,1) is appropriated to explain volatility cluster and estimate value of risk on security return. There were 19 securities that data esimation indicated that EGARCH (1,1) model was an appropriate form of variance equation, and showed that all volatility estimation were about 50% or about at moderated level. The skewness and Kurtosis of all residuals distributions showed that all skewness values were greater than zero (skewed to the right) and all Kurtosis values were greater than 3 (Leptokurtic distribution). This means that for each security, the daily price was concentrated on the left side of the mean value, and there were some extreme values to the right side. For the kurtosis, the distribution had a thicker tail which meaned that there was a high probability that the set of data would gain such extreme values

The Low-Risk Anomaly: Evidence from The Thai Stock Market

In many developed countries, low-risk stocks tend to earn superior risk-adjusted returns compared to high-risk stock. Using data on the Stock Exchange of Thailand between 2004 and 2015, this paper shows that the abnormal returns associated with investing in low-beta stocks are significant and robust. The zero-cost portfolio that longs low-beta stocks and shorts high-beta stocks delivers monthly four-factor alpha of 1.26%. This paper provides suggestive evidence that, in addition to leverage constraints, the low-risk anomaly can be caused by institutional designs that favour stocks that are index constituents.

IPOs’ signalling effects for speculative stock detection: evidence from the Stock Exchange of Thailand

ABSTRACTUsing a unique data set from the Thai stock market about the so-called, ‘Turnover List (TOL)’ of speculative stocks spanning the period 2004–2012, we investigate and provide new evidence on the relationship between IPOs’ pricing effects and subsequent classification as speculative investments. To be more specific, we examine the signalling effects for the detection of speculative stocks in relation to the degree of their prior IPOs underpricing. We also employ the market-feedback hypothesis to investigate this signalling process. Our results reveal a significant positive relationship between the magnitudes of the IPO underpricing and the probability of an IPO firm being classified officially as speculative on the TOL. Furthermore, we find that a 6-month abnormal return after going public increases the probability of speculative dealing in the IPOs. Next, we consider all listed firms in the Thai stock market and highlight the role of both abnormal return and trading volume in the transmission of probability for appearing on the TOL. In addition, we find that IPOs and non-dividend paying companies further increase the risk of being on the TOL.

Dynamic Relationship between Stock Return, Trading Volume, and Volatility in the Stock Exchange of Thailand: Does the US Subprime Crisis Matter?

Using daily data from 2004 to 2015, this paper attempts to examine the relationship between return, volume and volatility in the Thai stock market. The main findings are that trading volume plays a dominant role in the dynamic relationships. Specifically, trading volume causes both return and return volatility when the US subprime crisis is taken into account. The results may give understanding on how investors make their trading decisions that can affect portfolio adjustment.

Relationship of the Change in Implied Volatility with the Underlying Equity Index Return in Thailand

The main purpose of this study is to examine the relationship between the change in implied volatility index and the underlying stock index return. The dataset used in this study is from 11/19/2010 to 12/27/2013. The regression analysis is performed on stationary series. The empirical results reveal that there is evidence of a significantly negative and asymmetric relationship between the return and the change in implied volatility in the Thai stock market. The finding in this study gives implication for risk management.

Are Thai Equity Index Returns Sensitive to Interest and Exchange Rate Risks?

This study examines the sensitivity of the Thai stock market to nominal and real interest rate, and exchange rate risks during January 2004 and December 2015 using quantile regression. The analysis focuses on sectoral level and one main index in the stock market. The empirical results show that the stock market is more sensitive to exchange rate risk than interest rate risk. However, the impacts of these risks are different across equity index returns. The results from this study give implication for risk management of portfolio mangers and investors.

Who makes the grade and why? Corporate governance scores in Thailand

Purpose – The purpose of this paper is to describe the characteristics of publically listed firms in Thailand that have achieved superior corporate governance scores (CGSs) and their motivations. Design/methodology/approach – In-depth interviews with CFOs and directors were conducted to gain insights into the firms’ motivations in increasing their CGS. Multiple regression, ANOVA and t-tests were employed to examine the score patterns. In total, we collected a year’s data from 502 companies from the 2010 Thai stock market database. Findings – Interview results suggest that high CGS can: first, help reduce the cost of debt; second, help the firm achieve incremental profitability; third, improve a firm’s value and stock price; and fourth, create confidence among insiders and build trust among outsiders. The quantitative analysis indicates that large state enterprises and widely held companies that issue bonds are significantly more likely to obtain good CGS. Frequency of board meetings and superior financial performance are also associated with higher governance ratings. Originality/value – This study systematically examines the characteristics of companies achieving different corporate governance rankings and investigates possible motivations behind their choices.

Bank Stock Return Sensitivity to Interest Rate Changes in Thailand

Many studies were trying to explain the changes of stock returns by finding the factors impact on a certain market, industry, or stock. Focusing on the financial institution especially commercial bank, there are some research proved that interest rate is one of the crucial factor impact the commercial bank stock returns. Interest rate is the cost and return of money in financial market since commercial bank acts as major financial intermediary; therefore, interest rate is still the majority of its cost and return. In Thai stock market shows different result, the changing in interest rate reflects slightly on the change in stock returns. After taking a close look, the conclusion can be drawn from outcomes the bigger size of the bank experience the larger effect. Thus, bank size is not a real moderator affect the relationship, the trading volume of the bank is the real relevant factor. Consequently, the theory can be hold only if the market participants trade all bank stock equally.

Asymmetric Volatility of the Thai Stock Market: Evidence from High-Frequency Data

This study employs the daily data of the Stock Exchange of Thailand to test for the leverage and volatility feedback effects. The period of investigation is during January 4, 2005 to December 27, 2013, which includes the Subprime crisis period in the US that might affect the volatility of stock market return in emerging stock markets. The results from this study show that the US subprime crisis imposes a minimal positive impact on volatility. In addition, the estimations of the three parametric asymmetric volatility models give the results showing some evidence of the volatility feedback and leverage effects. The findings give implications for portfolio diversification and risk management.