Testing for Nonlinear Dynamics in the Stock Exchange of Thailand (SET)

Abstract

Understanding stock market price fluctuations plays an important role in economic policy and in corporate investment and financing strategies. In recent years, Khantavit and others have investigated the proposition that nonlinear processes studied in Chaos theory play an important role in these fluctuations. This study provides a detailed examination of this hypothesis using data from the Stock Exchange of Thailand (SET) from 1975 to 1999. The study finds that the distribution of the daily return on the SET index is nonnormal and leptokurtic. The results of the study also suggest that non-linear processes play a significant role in stock market behavior