The Effect Of International Tourism Growth On Stock Prices

Thailand's economy now heavily relies on tourism sector.Thailand is one of the most tourism-dependent countries in the world with tourism contribution accounting for 9.3%of total GDP in 2017.Moreover,stock markets can represent the national economy.This paper,therefore,empirically investigates the effect of international tourism growth on stock prices in Thailand's stock market by using the active stocks in the Stock Exchange of Thailand between the first quarter of 2013 and the last quarter of 2017 as the sample.Fixed effects model,random effects model,and difference-in-differences(DID)method are used to estimate the effect of international tourism expansion on stock prices.The empirical results show that the growth rate of international tourist arrivals to Thailand only significantly affects the stock prices in tourism-linked sector which includes hotel,airline,shopping mall,and hospital businesses.In addition,DID method is used to evaluate the impact of the free visa programme in Thailand on stock prices.The free visa policy was effective from December 2016 until August 2017 and it led to a significant increase in the number of foreign tourists visiting Thailand.The results from DID method confirm that the stock prices of companies in tourism-linked sector increase significantly during the free visa policy period.These findings indicate that international tourism growth is one of the key economic indicators of tourism-linked firms' stock performance.