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Rational Speculative Bubbles in the Thai Stock Market: Econometric Tests and Implications

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Author Info

  • Sethapong Watanapalachaikul

    ()
    (Centre for Strategic Economic Studies, Victoria University, PO Box 14428, Melbourne, Victoria 8001, Australia)

  • Sardar M. N. Islam

    ()
    (Centre for Strategic Economic Studies, Victoria University, PO Box 14428, Melbourne, Victoria 8001, Australia)

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    Abstract

    Understanding of factors like economic fundamentals or bubbles that normally determine the returns of stock in any emerging market such as the Thai stock market is essential for academic, investment planning and public policy reasons. An empirical study of the existence of rational speculative bubbles in the Thai stock market is undertaken by using the Weibull Hazard model. The conventional Weibull Hazard model is used as a benchmark model for other speculative bubble models. Empirical results suggest the presence of rational speculative bubbles in the Thai stock market, especially during the pre-crisis period. While rational speculative bubbles were not present immediately after the post-crisis period, some were observed a few years after the crisis. A possible explanation for such a result concerning rational speculative behaviour and bubbles in the emerging stock markets could be attributed to the presence of market imperfections in emerging stock markets, requiring institutional and policy developments to ensure efficient operation of the stock market.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Review of Pacific Basin Financial Markets and Policies.

    Volume (Year): 10 (2007)
    Issue (Month): 01 ()
    Pages: 1-13

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    Handle: RePEc:wsi:rpbfmp:v:10:y:2007:i:01:p:1-13

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    Web page: http://www.worldscinet.com/rpbfmp/rpbfmp.shtml

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    Related research

    Keywords: Financial markets; bubbles; Thai stock market; Weibull Hazard model; market imperfections;

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    Cited by:
    1. Deev, Oleg & Kajurova, Veronika & Stavarek, Daniel, 2013. "Testing rational speculative bubbles in Central European stock markets," MPRA Paper 46582, University Library of Munich, Germany.

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