Oil price shocks and sector returns in the stock exchange of Thailand

Abstract

This thesis is aimed to contribute to the literature through investigating linkages between the volatility of oil prices and Thailand stock market returns in various industries. Economic theories have established that oil price shocks could create chain reaction effects on the real economic activities. Theoretically, oil price shocks is one of the factors that impact the performance of the Thai stock market. In this thesis, the GARCH approach was employed to determine the impacts of the oil price shocks on each industrial sector listed on the Stock Exchange of Thailand (SET) and on the SET index itself. We analyzed the trend of returns on each industry index from July 2004 to September 2015 using daily data. Overall, we found significant evidence that oil price shocks can alter volatilities of the eight industry indices in terms of both direction and size.