Analysis of Thai Capital Market Linkages: Part I. Bivariate Copula Approach
About The Project
Analytically thorough understanding of financial-market dynamics is fundamental to the promotion of capital-market innovation, efficiency, and resilience; innovative, efficient, and resilient capital market, in turn, is fundamental to the sustainable economic development of the nation and the robust financial stability of its economy. This paper uses Bivariate Copula (semi-parametric statistics) techniques to analyse probabilistic co-movement amongst 14 variables representing domestic (Thai) and international (US/Emerging Market/Asia) foreign-exchange, fixed-income, and equity market movements, as well as foreign portfolio-investment flows into Thai equity shares and bonds. In addition, by staggering paired time-series w/ time lag on one of the pairs, the resulting copula relationship is suggestive of information flow, similar in spirit to testing for Granger Causality. The methodology pipeline thus developed can be applied to any other time-series pairings of interest, not just those related to Thai financial markets.