Abstract:
This paper investigates the effect of Thailand and U.S. monetary policy shock on stock market in Thailand for three level; market, industries and firm level from June 2000 to December 2018. In addition, this paper studies which firm characteristic cause the heterogeneity effect of stock and industry return on monetary policy innovation. Structural Vector Error Correction model follows Kim & Roubini (1999) and Ivrendi & Gulogu (2010) is applied to identify monetary policy shock.This paper finds that SET index return is statistically decrease 1.12 percentage point, on average in reaction to one standard deviation of unexpected increase in Thailand monetary policy shock. This paper also finds the heterogenous reaction of industry level to monetary policy shock. In particular, financial industry reacts outstanding negatively to tightening Thailand monetary policy compared to other industries which can be explained by capital intensive ratio, return on asset, financial leverage ratio, coverage ratio and foreign sale to total sale. Moreover, stock in bottom 20 percentile of financial industry that react to monetary policy shock are all listed in finance & securities sector. In firm level, this paper finds the heterogenous reaction of stock return on Thailand and U.S. monetary policy innovation. Moreover, capital intensive ratio, return on asset and financial leverage ratio explain the heterogenous reaction of stock return on tightening monetary policy shock.
