Good coups, bad coups: Evidence from Thailand's financial markets
2018
Lumjiak, Sutsarun | Nguyen, TTQ | Gan, Christopher | Treepongkaruna, Sirimon
This study investigates the short-run and long-run impact on Thailand's financial markets. Using daily data from the stock and foreign exchange markets during the period 2005 - 2017, the study shows (1) both coups in 2006 and in 2014 exert short-run impact on Thailand's stock and foreign exchange markets; (2) however, the direction and magnitude of impact are different and opposite in the two coups; and (3) in the long run, the coups exhibit minimal impact on the currency market, but induce better market performance (positive return and decrease in the return volatility) despite an increase in liquidity risk of the stock market. Against common beliefs about negative consequences of the coup d’états, this study suggests that the uncertainty surrounding coups can bring good investment opportunities for investors to earn abnormal profits. Moreover, in the long term, the coup can drive the country to better stability and development.
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