An analysis of Stock Price, Earning Yield and Long-term Government Bond Yield in Thailand

This paper is to analyze the relationship between stock index price, earning yield and long-term government bond yield in Thailand via using co-integration framework analysis. Our main analysis is to examine the three research questions. First, is there a long-run relationship between the stock index, earning yield and long-term government bond yield? Second, what does the impacts on the stock price while the changes of long-term government bond yield? Third, can the change of long-term government bond yield predict the stock price? However, we also study short-term dynamics to found out if long-term government bond yield could explain the stock price regarding the Fed model. Thus, we get the results from the relationship between stock price and long term government bond yield is negative, and the relationship between stock price and earning yield will be positive.