Scientific Papers

JOURNAL OF INTERNATIONAL STUDIES


© CSR, 2008-2019
ISSN: 2306-3483 (Online), 2071-8330 (Print)

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Determinants of investor behavior in SET50 index futures and options markets: Evidence from Thailand Futures Exchange

Vol. 12, No 3, 2019

 

Woradee Jongadsayakul

 

Department of Economics, Kasetsart University,

Thailand

fecowdj@ku.ac.th

Determinants of investor behavior in SET50 index futures and options markets: Evidence from Thailand Futures Exchange

 

 

 

 

Abstract. This study provides a new empirical evidence to demonstrate the factors influencing investors’ behavior at SET50 index futures and options markets via two types of simultaneous equation estimation, Two Stage Least Squares (2SLS) and Three Stage Least Squares (3SLS). Both 2SLS and 3SLS estimation results show a bilateral causality between stock market volatility and derivatives market activities. Between futures trading and options trading, there is a bilateral causality in 3SLS model, but there is a unidirectional causality from futures market activity to options market activity in 2SLS model. Turnover ratio has a positive impact on stock market volatility, but its relationship with speculative behavior relative to hedging behavior in SET50 index futures is negative in both methods. Only 3SLS model shows a negative impact of turnover ratio on the relative importance of speculative activity at SET50 index options market. Moreover, the proportion of foreign investors shows a positive relationship with speculative investor behavior at SET50 index futures market. There is an increase in SET50 index options trading by foreign and institutional investors for speculation, relative to hedging. Speculative trading is mostly related to put options, while hedging trading is mostly related to call options.

 

 

Received: February, 2019

1st Revision: April, 2019

Accepted: September, 2019

 

DOI: 10.14254/2071-8330.2019/12-3/2

 

JEL ClassificationG12, G23, G32

Keywordsindex futures, index options, investor behavior, Thailand Futures Exchange