Empirical Assessment of the Present Value Model of Stock Prices Using the Data from Thailand’s Stock Market

Jiranyakul, Komain (2008): Empirical Assessment of the Present Value Model of Stock Prices Using the Data from Thailand’s Stock Market. Published in: NIDA Economic Review , Vol. 3, No. 1 (June 2008): pp. 24-36.

Abstract

This study examines whether bubbles are present in the Stock Exchange of Thailand. Three different methods are employed: variance bounds test, equity price bubbles test, and cointegration tests. The results from the variance bounds tests show that stock prices (proxied by the stock market index) diverge from their fundamental values. Speculative bubbles exist using the West’s two-step test. There is no cointegration between stock prices and dividends from the results of both Engle-Granger cointegration test and the bounds testing for cointegration. The divergence of stock prices from their fundamental value and no cointegration between stock prices and dividend may indicate the presence of bubbles in the stock market during the period of investigation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Stock prices, Present Value model, Variance Bounds Test, Cointegration, Equity Price Bubbles
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General

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