Behavior of Stock Market Index in the Stock Exchange of Thailand
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Abstract
In this paper, the variance-ratio test and the ARMA-GARCH (1,1) are used to test whether the
Stock Exchange of Thailand is an efficient market. Using monthly market index during
January 1987 and December 2006, the variance-ratio test shows that the market index follows
a random walk process, and this is confirmed by unit root tests. The GARCH process shows
that the volatility of stock market return generated by the GARCH variance series exhibits an
uneven pattern. The unpredictable stock index and uneven volatility of stock return imply
that the Thai stock market is efficient according to weak-form efficient market hypothesis.
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