Stock price movement analysis of the financials industry on the Stock Exchange of Thailand

The problem. This study analyzed (a) the movement of Financials industry indexes---Banking sector index, Finance and Securities sector index, and Insurance sector index---on the Stock Exchange of Thailand (SET); (b) the relationships between the variances of the sector series of the Financials industry and the SET Index; and (c) Granger causality among the Banking sector index, Finance and Securities sector index, and Insurance sector index.; The analysis results were used to the test the following hypotheses: (a) that the movement of the indexes is random, (b) that the relationships between the variances of the sector series and the SET Index are positive, and (c) that there is Granger causality in the sector indexes. In addition, the results were put into the context of the Random Walk theory, the Efficient Market Hypothesis, and Chaos theory.; Method. A descriptive-correlational method was used. The data were daily stock index prices of the SET and the sectors of the Financials industry covering the 10-year period January 3, 1995, through December 30, 2004.; The movement of the SET Index and the Financials industry sector indexes was analyzed by using the Durbin-Watson Test Statistic to determine autocorrelation. The relationships between the variances of the sector series of the Financials industry and the SET Index were analyzed by using Generalized Autoregressive Conditional Heteroscedasticity in Mean (GARCH-M). The Granger causality test was used to analyze Granger causality among the Financials industry sector indexes.; Results. First, the results of the Durbin-Watson test statistic confirmed that the movement of the SET Index and the Financials industry sector indexes was random. Second, the GARCH-M results showed a positive relationship between the variances of the Banking sector index and the SET Index, the variances of the Finance and Securities sector index and the SET Index, and the variances of the Insurance sector index and the SET Index. Third, the results of the Granger causality test indicated two-way causality relationships between Finance and Securities index and Insurance index and between Insurance index and Banking index but only a one-way relationship from Banking index to Finance and Securities index.