Market Efficiency and Idiosyncratic Volatility in Vietnam

Abstract

We study idiosyncratic volatility in the Vietnamese stock market between July 2007 and February 2015. We show that there is no relationship between the idiosyncratic volatility and average returns in the Vietnamese market. Our results also indicate that neither the aggregate market volatility, the aggregate idiosyncratic volatility nor can predict market returns. Finally, we find no trend in idiosyncratic volatility and a decreasing trend of market volatility over the sample period. In addition, we find strong evidence of both short as well as long term reversal in Vietnam stock market during the sample period.

The prospect theory and the idiosyncratic risk-return linkage: a quantile regression approach for Vietnam’s stock market

“…Akin to the results of Fang et al. (2015), Tran and Nguyen (2015) did not detect a significant connection.…”

“…Namely, Fang et al. (2015) and Tran and Nguyen (2015) found insignificant association between idiosyncratic risks and stock returns in Vietnam. Vo et al.…”

“…Hence, we have found the evidences for the ability of the Prospect Theory to explain the relationship between the idiosyncratic risks and the stock returns in the case of Vietnam, which has not been investigated by any prior research. Namely, Fang et al (2015) and Tran and Nguyen (2015) found insignificant association between idiosyncratic risks and stock returns in Vietnam. Vo et al (2020) also reported insignificant relationship between idiosyncratic risks and stock returns in Vietnam over the period 2008M1-2018M12 for the full sample and the sub-samples containing stocks with negative alphas.…”

“…They demonstrated that neither the conditional nor the realized idiosyncratic risks have correlation with the stock returns, and the findings remained unchanged after controlling for the roles of the 2008 financial crisis and some control variables such as market capitalization and lagged stock returns. Tran and Nguyen (2015) used the data in the period 2007M7-2015M2 and the Fama-MacBeth regression method to investigate the relationship between idiosyncratic risks and stock returns in Vietnam. Akin to the results of Fang et al (2015), Tran and Nguyen (2015) did not detect a significant connection.…”

“…Tran and Nguyen (2015) used the data in the period 2007M7-2015M2 and the Fama-MacBeth regression method to investigate the relationship between idiosyncratic risks and stock returns in Vietnam. Akin to the results of Fang et al (2015), Tran and Nguyen (2015) did not detect a significant connection.…”