Good coups, bad coups: evidence from Thailand’s financial markets

  • Received January 11, 2018;
    Accepted April 16, 2018;
    Published May 4, 2018
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  • Article Info
    Volume 15 2018, Issue #2, pp. 68-86
  • Cited by
    3 articles

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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

This study investigates the short-run and long-run impact of coups on Thailand’s financial markets. Using daily data from the stock and foreign exchange markets during the period 2005–2017, the study shows (1) both coups in 2006 and in 2014 exert short-run impact on Thailand’s stock and foreign exchange markets; (2) however, the direction and magnitude of impact are different and opposite in the two coups; and (3) in the long run, the coups exhibit minimal impact on the currency market, but induce better market performance (positive return and decrease in the return volatility) despite an increase in liquidity risk of the stock market. Against common beliefs about negative consequences of the coup d’états, this study suggests that the uncertainty surrounding coups can bring good investment opportunities for investors to earn abnormal profits. Moreover, in the long term, the coup can drive the country to better stability and development.

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    • Figure 1. Thai Government and returns of USD/THB (USD/THB_R) (April 2005 – April 2017)
    • Figure 2. Thai Government and returns of SET index (SET_R, scaled by 10) (April 2005 – April 2017)
    • Figure 3. Thai Government and net stock purchase by foreign investors (FCBuy) (April 2005 – April 2017)
    • Figure 4. Cumulative abnormal market quality in the Thai stock market
    • Figure 5. Cumulative abnormal market quality in the Thai currency market
    • Table 1. Thailand’s key political events (2005 to 2017)
    • Table 2. Summary statistics
    • Table 3. Short-run analysis on the USD/THB
    • Table 4. Short-run analysis on the SET
    • Table 5. Short-run and long-run analysis on the USD/THB
    • Table 6. Short-run and long-run analyses on the SET