- Journal of Economics Finance and Accounting
- Vol: 5 Issue: 1
- VIETNAM’S STOCK MARKET VOLATILITY UNDER MACROECONOMIC IMPACTS
VIETNAM’S STOCK MARKET VOLATILITY UNDER MACROECONOMIC IMPACTS
Authors : Thu Thuy Nguyen, Kadom Shubber
Pages : 38-57
Doi:10.17261/Pressacademia.2018.783
View : 8 | Download : 7
Publication Date : 2018-03-30
Article Type : Research
Abstract :Purpose - This study investigates whether the volatility of stock market returns is determined by macroeconomic variables either as individual or as a group, within the context of Vietnam – a frontier emerging market. Six macroeconomic factors have been selected, including economic growth (GDP), consumer price index (CPI), broad money supply (M2), interest rate (represented by refinancing rate – FR), foreign exchange rate USD/VND (EX), and foreign direct investment (FDI). Methodology - Using 161 monthly observations collected from August 2000 to December 2013, the paper employs general autoregressive conditional heteroskedasticity (GARCH) framework to measure stock market volatility as well as to estimate this volatility under indicated macroeconomic impacts. Findings - Taking the volatility clustering into account, the GARCH (1,1) models reveal that the volatility of Vietnam’s stock market returns is highly persistent, suggesting a long memory of the volatility in response of a shock. Additionally, the stock market volatility could be predicted better using previous shocks (i.e. those originating from GDP, CPI and EX) rather than the previous volatility itself. Conclusion - The prediction of Vietnam’s stock market volatility could be better based on the selected macroeconomic indicators. A monthly change in consumer price index appears as the most essential indicator that help predicting the volatility of the Vietnam’s stock market. Any news about economic growth can be considered as the second significant factor in explaining Vietnam stock return volatility. Furthermore, the univariate analysis shows a statistical significant evidence for the impact of a change in the exchange rate (USD/VNA) on Vietnam’s stock market volatility.Keywords : Stock market volatility, macroeconomic factors, GARCH, emerging markets