Abstract:
The objective of the study is to identify the behavior of foreign investors effecting stock return and volatility of Thailand Stock Market during 1995-2000. In order to determine the trading strategy and market response, key variables are classified into two groups, dependent and independent variables. SET index; Banking, Finance, Communication, Elctronic, as well as Energy Sectors are considered as dependent variables since these groups responses according to the major independent variable such as Trading volume, DJIA, IXIC, NIX, HK, INET, CNET, FNET, VOL, Baht The coefficient correlation under OLS and GARCH are primary tools to determine the degree of influence to SET index. GARCH model does uperior tools in minimizing the error term. The regression results after improving the OLS model by using GARCH model were as followed; Retail investors have negative coefficient correlation to SET Indext and Energy sector, but they have positive coefficient correlation to Banking, Finance, Communication, and Electronic Sectors. On the contrary, Institution Investors have positive coefficient corrlation only with Banking Sector. Furthermore, the institution investors had negative coefficient correlation with SET index, Financial, Communication, Energy as well as Electronic sector. In summary, both retail and institutional investors have reverse relationship to SET Index. Retail investors have response to the market volatility faster than institutional investors. Foreign investors did "contraries investment strategy." They have positive coefficient correlation to SET index, and all 5 major business sectors. Foreign Exchang (Thai Baht/US$) had only one positive coefficient correlation to Electronic sector, and has negative coefficient correlation to SET index, Banking, Finance, Communication, as well as Energy sectors. The volume trading had positive effect on all depedent variables such as SET Index, and its 5 business sectors, implying that when the market trickles in specified sector, all three investors will follow. It is concluded that foreign investors can influence the stock return and create volatility of Thailand Stock Market since foreign investors have positive coefficient correlation to all dependent variables.
