Bangkok Traffic Congestion, Stressed Investors, and Thai Stock-Market Returns

Abstract

Stress influences decision making. Stressed investors may trade in concert, driving stock market returns in a certain direction. This study examines the effect of Bangkok's traffic-induced stress on Thai stock market returns. The average Longdo traffic index during morning rush hours was used as the proxy for the level of stress. As Bangkok traffic affects only local investors, this study measures returns using the return on the Market for Alternative Investment (mai) index. Local investors have an average 96.96% share of the mai stocks’ trading volume. The sample data were taken from the period beginning on January 4, 2012, and ending on April 2, 2020. A test based on the artificial Hausman regression indicates that error-in-variable and omitted-variable problems are present in the estimation. Therefore, the generalized method of moments (GMM) regression—an instrumental variable (IV) regression, together with Racicot and Théoret’s (2010) two-step IVs, were chosen over the traditional ordinary least squares regression for this study. The IVs are informative and valid, with informativeness and validity R2 values of 0.9888 and 0.0000, respectively. The slope coefficient of stock returns on the traffic index was found to be negative and significant. Traffic-induced stress can drive stock market returns. Net selling by local institutional investors explains the significant traffic-induced stress effect in the stock market.