Macroeconomic Capital Market and Foreign Stock Market Factors Affecting Stock Returns in the Stock Exchange of Thailand (SET)

Abstract

This study is a quantitative research study utilizing quarterly time-series data from 2005 to 2024, totaling 80 quarters, to explore the relationship between stock returns in the Stock Exchange of Thailand (SET) and domestic macroeconomic factors, capital market factors, foreign stock market returns, and economic crisis events. The statistical tools employed before estimation included descriptive statistics, unit root tests for data stationarity, and econometric problem diagnostics. OLS with additional variables was applied to estimate the parameters. The results revealed that, in the main model, the factors exhibiting a statistically significant positive relationship with SET returns include the current inflation rate, the real effective exchange rate, the change in trading volume, and the return of the S&P 500, while the returns of MSCI Emerging Markets, CSI 300, and TOPIX were significantly positive in the alternative models. Conversely, the change in broad money supply, the change in the 1-day repurchase rate as a proxy for the policy interest rate, and the change in public debt did not show a statistically significant relationship with SET returns in the main model, while the change in net foreign direct investment inflows, which was not included in the main model, was not significant in the alternative models that included it. Although economic crisis was not statistically significant in the main model, some alternative models demonstrated a negative impact. This finding affirmed its impact on investor confidence and put downward pressure on capital market returns. Therefore, policymakers should enhance transparent data disclosure and communicate economic trends clearly to maintain investor confidence. Additionally, investors should monitor foreign stock market movements and market liquidity when managing portfolio risk.