The impacts of political events on stock return and volatility : case of Thailand

Abstract

This study investigates the stock return and volatility impact of various Thai political events on different group of firms based on four characteristics, which are foreign ownership structure, growth options, analyst coverage and financial status. The sample period covers 1996 to 2006 using daily data of all Thai listed firms. The results suggest that political news does not affect all firms identically, also the impact is better observed when political news are separately studied by their type. Political news related to government changes of authority is correlated to positive returns, while, domestic- conflict related news is correlated to large negative returns. At firm level, the study finds positive response from high growth stocks and high analyst recommended stocks towards news representing less degree of uncertainty, i.e., the government changes of authority. However, their negative response on domestic-conflict events was even worse than low growth stocks and low analyst recommended stocks. Financially weak firms are the least favorable among all groups of firms on the event date with domestic conflicts. Volatility impact is observed in some portfolios for specific type of news. The study, therefore, gives insight into the forces of Thai political events that varies from firm to firm.