The nexus between bank connectedness and investors’ sentiment

Niţoi, Mihai; Pochea, Maria Miruna

doi:10.1016/j.frl.2021.102432

Cited by 5 publications

(1 citation statement)

References 24 publications

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“…Using directional spillover and tail-event driven network risk, Apostolakis et al (2022) conclude that the connectedness of bank stock returns in the Economics and Monetary Union of Europe is stronger during the sovereign debt crisis, while Hernandez et al (2020) emphasize that shock transmission tends to be stronger in developed markets compared to emerging markets. Niţoi and Pochea (2022) employ the Granger causality test with confirmation that American banks are transmitters of idiosyncratic return spillovers and European banks are net receivers, especially those having strong links with American financial markets such as the UK and Switzerland. Tabak et al (2022) utilize the generalized value at risk to establish the mean spillover effect of banking network and discover that markets in developed countries tend to be the transmitters of shock, whereas those in emerging countries tend to be the receivers.…”

Section: Literature Reviewmentioning

confidence: 99%

Connectedness of Vietnamese bank stock returns under the impact of the COVID-19 pandemic

Phu Ha,

Tram Anh,

Hong Thai

2023

Banks and Bank Systems

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The COVID-19 pandemic highlighted the sensitivity of connectedness among bank stock returns in Vietnam. The aim of this study is to examine the strength of this connectedness along with the effect of government lockdown policy and COVID-19 cases on the total connectedness index (TCI) of 16 listed banks on Vietnamese stock exchanges. They are assessed using the database of FiinPro on the banking sector between January 2020 and July 2022, Vietnam Center for Disease Control and Prevention (CDC), and The World Health Organization (WHO) on the COVID-19 pandemic, employing a time-varying-parameter vector autoregressive (TVP-VAR) connectedness framework and the conditional quantile regression model. The results show that at the firm level, there is strong interdependence among bank stock returns with the average TCI being as high as 90.66%. It is also revealed that medium and large-sized banks are receivers of shock, while smaller banks are transmitters. As far as the impact on TCI is concerned, the widespread of the pandemic with the increasing number of COVID-19 cases is significantly negative, whereas the tightening of lockdown is significantly positive. Besides, the degree of the impact varies according to the 95th, 75th, 50th and 25th levels of conditional quantile regression. Based on the study’s findings, individual investors are recommended to thoroughly analyze the connectedness of banks before making investment decisions, while bank regulators should strengthen controls on credit relationships with small banks. Regarding policy makers, it is proposed to apply flexible restrictions and short-term lockdown depending on the actual outbreak of the pandemic. AcknowledgmentThe paper was conducted within the scope of Project QG21.48 of Vietnam National University.

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