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An Analysis of Domestic and International Events Impact Stock Return Volatility of the Outsourcing Market in Vietnam Kuang-Hsun Shih, Chinese Culture University, Taipei, Taiwan shihsteve@faculty.pccu.edu.tw Fu-Ju Yang, Chinese Culture University, Taipei, Taiwan fuju@faculty.pccu.edu.tw Yi-Hsien Wang, Chinese Culture University, Taipei, Taiwan holland@mail2000.com.tw Dao Le Minh, Chinese Culture University, Taipei, Taiwan dao.le.minh@gmail.com Abstract Being known as a young and small market, Vietnam stock exchange is vulnerable to both internal and external changes economically. Recently, the recession of global economy and its influences on Vietnam economy have caused the investors’ worries and doubts about this investment channel. The purpose of this study is to examine which events impact significantly on stock return in Vietnam stock exchange. The study used daily stock indexes in Ho Chi Minh stock exchange from 2007 to 2011 as data in order to examine stock returns volatility by using family GARCH models. The preliminary results are expected to be found that interactive effect of domestic and international events on stock return volatility in Vietnam market. The research findings perhaps can be a reference benchmark for companies and investors in decisionmaking. Keywords: Stock market, stock return volatility, GARCH model, VN-index, Domestic, International Events, decision-making Biography Dr. Kuang-Hsun Shih, is an Professor & Chairman, Department of Banking & Finance at Chinese Culture University, Taipei, Taiwan. He earned his Ph.D from the Nova Southeastern University. His major interest is in corporate finance and his paper appeared has published extensively in many academic journals. Dr. Fu-Ju Yang is an Associate Professor of Department of Banking & Finance at Chinese Culture University, Taipei, Taiwan. He earned his Ph.D from the National Chiao Tung University. His major interest is in corporate finance and his paper appeared has published extensively in several academic journals. Dr. Yi-Hsien Wang is an Associate Professor of Department of Banking & Finance at Chinese Culture University, Taipei, Taiwan. He earned his Ph.D from the Ming Chuan University. His major interest is in economics and time series and his paper appeared has published extensively in several academic journals. Miss. Dao Le Minh is MBA Student of Graduate Institute of International Business Administration at Chinese Culture University, Taipei, Taiwan. Tenth Annual International Daejeon, South Korea P a g e | 76 Smart Sourcing Conference June 28-29, 2012
Introduction Comparing with other stock markets in the region and in the world, Vietnam stock market is likely a baby. Although the first Securities trading center was licensed in 1998 in Ho Chi Minh (it’s abbreviated HOSE), the first official transaction was done in 2000, marking the birth of Vietnam stock market with VN-index. 5 year later, the second securities trading center was launched in Hanoi (hereafter called HNX). At 10 years old, Vietnam stock market has developed dramatically with 2 trading centers, a market for unlisted public company (to be called UPCoM), more than 550 commodities, 105 Securities companies, 46 mutual funds, about 1 million trading accounts of which 25% is foreign investors. Almost previous studies on stock volatility related to developed markets, even studies on regional ASEAN markets, there are a few researches on Vietnam stock market. Although it is still young and small, it has been developing and huge potentials, it is worthy to be investigated. The purpose of this paper is to find domestic or international events which impacts on stock return volatility. It may become a literature view help investor to forecast the stock return trend or further studies about stock market in Vietnam. As many previous researches concerning stock return volatility, we also will employ the class of ARCH/GARCH model (Engle, 1982;Bollerslev, 1986) in order to measure the impact of events on stock volatility. In finance research, stock return volatility is known as a familiar topic. Volatility is a measure of the uncertainty about the returns provided by stock. The volatility of stock price can be formally defined as the standard deviation of the national logarithm of the change in stock price in one year (Mai, 2008). In financial markets, volatility is a central issue to the theory and practice of investment (Do, Mcaleer and Sriboonchitta, 2009). Therefore, with the increase of economic and politic uncertainties internally and externally, many empirical studies about stock return volatility have been carried out over the world, especially in emerging stock markets such as South East of Asia. Many economic and politic events or factors were tested to investigate their impacts on stock return volatility. Stock volatility is linked with macroeconomic variables and it can be forecasted based on both real-time macroeconomic data (Pierdzioch, Dopke and Hartmann, 2008). The events affected to stock return volatility can be grouped into domestic event and global events. Domestic events may be economic issue such as inflation, monetary policy or financial reform as reviewing studies of (Pham, 2011). Emphatically, stock market prices may be important for monetary policy, independently of their direct impact on inflation and a monetary policy focused on maintaining price stability in the long-term can contribute also to stock market stability (Vithessonthi, Techarongrojwong, 2012). Monetary policy announcements have a significant effect on stock prices (Cassola and Morana, 2004). Besides, political news is correlated to returns for stock Index (Chan and Wei, 1996). Data and Empirical Result The data source is the daily stock prices of the Ho Chi Minh Stock Exchange market index (VN- Index) (Mai, 2008). The closing values of VN-Index for the period from 2007 to 2011 were collected from the official website of Bank for Investment and Development of Vietnam Securities Company Ltd.(www.bsc.com.vn). The related information can be obtained in website of Bloomberg (http://www.bloomberg.com/quote/VNINDEX:IND/chart/). The VN-index was calculated as a value weighted index of all companies listed in the Ho Chi Minh stock exchange with base value of 100 (Mai, 2008). According to instruction of Government about monetary or fiscal policy, written Directives are issued by the State Bank of Vietnam. And then the lower level legal documents are Decision, Circulars and official letters adopted as specification or partly revision or replacement. All legal documents were obtained from official website of the State Bank of Vietnam (www.sbv.gov.vn). Accordingly, the dummies are embedded in the EGARCH model to detect the effect of congressional sessions as follows: Tenth Annual International Daejeon, South Korea P a g e | 77 Smart Sourcing Conference June 28-29, 2012
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2012 Global Sourcing of Services: B
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Center for Global Outsourcing Tenth
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Center for Global Outsourcing 26 Be
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Dear Conference Participants: I wou
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Center for Global Outsourcing 26 Be
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Contemporary Issues and Challenges
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Introduction Outsourcing is contrac
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In this way Big Business is on the
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Introduction and Literature Review
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DESIGNING AND IMPLEMENTING A FRAMEW
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giving weight to the sub criteria,
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