Dependence Structure between TOURISM and TRANS Sector Indices of the Stock Exchange of Thailand

O. Puarattanaarunkorn, T. Kiatmanaroch, S. Sriboonchitta

Abstract

Sriboonchitta et al. [1] argued that the traditional multivariate anal-ysis imposed some strong assumptions and suggested to use the copula approachthat provided better exibility for the analysis. Thus, this study used the copulabased ARMA-GARCH to examine the dependence structure between the price oftwo sectors, the Tourism & Leisure Index (TOURISM) and the Transportation& Logistics Index (TRANS), of the stock exchange of Thailand (SET). Our re-sults provide evidence of a relatively small positive dependence between two sectorindices. The BB1 copula that can capture both the lower tail and upper tail de-pendences is chosen to describe the dependence structure. The result shows thatthe lower tail dependence is stronger than the upper tail dependence. This infor-mation is useful for investors in recognizing that the chances for two indices willhave to face the probability of joint occurrences of crashing all together.