ISBN: 3790815519
TITLE: Empirical Finance
AUTHOR: Islam, Watanapalachaikul
TOC:

Foreword V
Abstract, Preface and Acknowledgement VII
1 Introduction 1
1.1 Introduction 1
1.2 Financial System and Issues 2
1.3 Characteristics of the Emerging Stock Markets in Developing Countries 3
1.4 Financial Econometrics: Methods and Models 5
1.5 The Thai Financial System and the Emerging Stock Market 5
1.6 Limitations of Existing Literature and the Motivation 6
1.7 The Objectives of the Study 7
1.7.1 Objectives 7
1.7.2 Welfare Economics of Finance: Policies and Institutions 7
1.8 Contributions of this Research 8
1.9 Econometric Methodologies and Sources of Data 8
1.9.1 Econometric Methodologies 8
1.9.2 Sources of Data and Computer Programs 9
1.10 Structure of the Book 10
1.10.1 Chapter Structure 10
1.10.2 General Structure 11
2 The Thai Financial System: Characteristics of the Emerging Thai Stock Market 13
2.1 Introduction 13
2.2 Financial and Capital Markets 13
2.2.1 The Central Bank and Commercial Bank 15
2.2.2 Money and Capital Markets 16
2.2.3 Foreign Exchange Market 17
2.2.4 Stock Market: General Characteristics 18
2.3 Recent Issues 21
2.3.1 Financial Liberalisation 21
2.3.2 Economic Crisis 21
2.3.3 Focus an Foreign Capital Flows 22
2.3.4 Unstable Exchange Rate in an Open Economy 22
2.3.5 Market Imperfection 23
2.4 Conclusions 23
3 Descriptive Statistics and General Characteristics of the Stock Market 25
3.1 Introduction 25
3.2 Descriptive Statistics 25
3.3 Univariate Time Series Modelling 31
3.3.1 Moving Average 33
3.3.2 Exponential Smoothing 36
3.3.3 Holt Winters' Multiplicative Method 44
3.3.4 ARIMA Models 49
3.5 Implications and Empirical Characteristics 50
3.6 Conclusion 51
4 Market Efficiency Models and Tests 53
4.1 Introduction 53
4.2 Market Efficiency Hypothesis 54
4.2.1 The Concept 54
4.2.2 EMH and Time Series Behaviour 56
4.3 Stock Market Efficiency Tests 58
4.3.1 Run Test 58
4.3.2 Autocorrelation Function Test 60
4.4 The Market Efficiency of the Thai Financial System 62
4.5 Conclusions 63
5 Stock Valuation Models 65
5.1 Introduction 65
5.2 Literature Review: Why a Multifactor Model? 66
5.2.1 The Rational Valuation Model 66
5.2.2 Capital Asset Pricing Model (CAPM) 68
5.2.3 The Arbitrage Pricing Theory 74
5.2.4 Estimation of the Valuation Model 76
5.2.5 Limitation of Current Models 76
5.2.6 Relation between Macroeconomic Factors and Stock Prices 77
5.3 Models, Econometrics Methodology and Data 77
5.3.1 Variable Selection, Macroeconomic and International Factors 77
5.3.2 Multi-Factor Model 80
5.3.3 Data 80
5.4 Results and Implications for Valuation 81
5.4.1 Unit Root and Cointegration Test 81
5.4.2 The Factors Determining the Values of the Stocks 86
5.5 Cointegration Test of the Six-Variable Model 87
5.6 The Real Value of Stocks 88
5.7 Conclusions 88
6 Models for Rational Speculative Bubbles 91
6.1 Introduction 91
6.2 Rational Speculative Bubbles and Financial Market Behaviour 92
6.2.1 The Concept of Bubbles 92
6.2.2 Issues about Bubbles 93
6.3 Different Models 94
6.4 Adopted Models 96
6.4.1 Discrete Log Logistic Model 96
6.4.2 Weibull Hazard Model 96
6.5 Data and Empirical Results 97
6.6 Rational Speculative Bubbles in the Thai Stock Market 103
6.7 Conclusions 106
7 Models for Anomalies Studies 107
7.1 Introduction 107
7.2 Anomalies in the Stock Market 107
7.3 Tests of Anomalies in the Thai Stock Market 108
7.3.1 The Day of the Week Effect 108
7.3.2 The January Effect 109
7.4 Empirical Results 109
7.4.1 The Day of the Week Effect 109
7.4.2 The January Effect 117
7.5 Anomalies in the Thai Stock Market 119
7.6 Anomalies and Investors Motives 121
7.7 Conclusions 122
8 Volatility Models 123
8.1 Introduction 123
8.2 Models for Volatility 124
8.2.1 Autoregressive Conditional Heteroscedasticity (ARCH) Models 124
8.2.2 Autoregressive Moving Average (ARMA) Models 128
8.2.3 Stochastic Volatility (SV) Models 128
8.3 Adopted Volatility Models - GARCH Type Models 129
8.3.1 GARCH(p,q) 130
8.3.2 EGARCH 131
8.3.3 GARCH-M 132
8.3.4 GJR-GARCH 132
8.3.5 PGARCH 133
8.4 Data and Estimation Results 134
8.5 Volatility in the Thai Stock Market 145
8.6 Conclusions 146
9 Summary and Conclusions 147
9.1 Introduction 147
9.2 Major Empirical Finance Findings 148
9.3 The Empirical Characteristics of the Stock Market 148
9.3.1 Efficiency 148
9.3.2 Valuation 148
9.3.3 Rational Speculative Bubbles 149
9.3.4 Anomalies 149
9.3.5 Volatility 149
9.3.6 Other Characteristics 149
9.4 Welfare Economics of the Financial System: Institutions and Policies 150
9.5 Financial Econometrics: Modelling and Applications 152
9.6 Future Research 152
9.7 Conclusions 153
Appendix 1 Structure of Financial Institutions in Thailand 155
Appendix 2 Market Efficiency and ARIMA Test Results 156
Appendix 3 Regression Test Results 161
Appendix 4 Day of the Week and January Effect Test Results 167
List of Figures 183
List of Tables 185
List of Appendices 187
Bibliography 189
Index 199
About the Authors 201
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