Relationship Between Trading Volumes of Investor Groups and Stock Index Returns on the Stock Exchange of Thailand

Abstract

     The relationship between trading volumes of investor groups and stock index returns on the Stock Exchange of Thailand (SET) was investigated. By applying daily closing price data from January 3, 2006 to December 30, 2010, we employed GARCH, TARCH and EGARCH models to analyze and observe information efficiency of the SET. Investor groups of the SET consisted of foreign investors, institutional investors, local investors, and proprietary investors. The results showed that trading volumes of all investor groups influence SET returns and reflected that the SET is not efficient where there is a low level of trading . Because past trading volumes of foreign investors, institutional investors, and local investors influenced returns, our findings supported the Sequential Information Arrival Hypothesis. In other words, SET indices are sensitive to noise trading risks.