Political Uncertainty and the Thai Stock Market

Authors

  • Suthawan Prukumpai Faculty of Business Administration, Kasetsart University, Bangkok Thailand.
  • Yuthana Sethapramote School of Development Economics, National Institute of Development Administration, Bangkok, Thailand
  • Pongsak Luangaram Faculty of Economics, Chulalongkon University, Bangkok, Thailand

Keywords:

political uncertainty, Thai stock market, GARCH, VAR, quantile regression

Abstract

The purpose of this paper is to examine the relationship between political uncertainty and the Thai stock market. The news-based index of Luangaram and Sethapramote (2018; 2020) is employed to capture the dynamics of political uncertainty from the second quarter of 1997 to the second quarter of 2020. The results reveal interesting evidence. Firstly, market volatility increases during periods of high political uncertainty. However, the effect on short-run stock returns is insignificant. Secondly, stock prices respond significantly to political uncertainty in the negative direction based on the vector autoregression (VAR) model. The effects are strongest in the second to fourth quarters. Finally, the findings reveal that political uncertainty pushes up the equity risk premium, and the impact is strongest at the extreme lower quantiles of return distributions.

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Published

2022-12-19

How to Cite

Prukumpai, S., Sethapramote, Y., & Luangaram, P. (2022). Political Uncertainty and the Thai Stock Market. SOUTHEAST ASIAN JOURNAL OF ECONOMICS, 10(3), 227–257. Retrieved from https://so05.tci-thaijo.org/index.php/saje/article/view/262745

Issue

Vol. 10 No. 3 (2022): Southeast Asian Journal of Economics, Vol.10 No.3 (December 2022)

Section

Original Articles

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Copyright (c) 2022 SOUTHEAST ASIAN JOURNAL OF ECONOMICS

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