Which global stock indices trigger stronger contagion risk in the Vietnamese stock market? Evidence using a bivariate analysis

Wang, Kuan-Min; Lai, Hung-Cheng

doi:10.2298/pan1304473w

Cited by 12 publications

(4 citation statements)

References 35 publications

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“…Thus, Vietnam is one of the fastest growing economies in Southeast Asia (Nikkei Asian Review, 2019). As an emerging nation with a transitional economy, the country adopted many capitalist business traits since the early 1990s (Wang & Lai, 2013). Many corporate financial decisions -especially capital structure -are based not only on the characteristics of the company but also on the volatility of macroeconomic factors.…”

Section: Introductionmentioning

confidence: 99%

Predictors of Return on Assets and Return on Equity for Banking and Insurance Companies on Vietnam Stock Exchange

Pointer

Khoi

2019

EBER

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The objective of the article is to empirically examine the predictors of ROA and ROE for banks and insurance firms listed on the Vietnamese stock market. Research Design & Methods:The authors applied a quantitative approach. A basic OLS regression model is used to investigate key proposed predicators of ROA and ROE. Findings: Internal variables are statistically significant predictors for both ROA and ROE in the study, including firm size, book value, return on equity, years in business, and earnings per share. The direction of causality is not consistent across the ratios. Capital structure was significant and negative for ROE. Banks earned lower return on their assets and higher return on their equity than insurance companies. Implications & Recommendations: Given the significance of internal variables such as firm size, return on equity, book value, years in business and earnings per share as predictors of ROA and ROE, management must focus on improving its internal organizational structure which affects these variables. Years in business is significant for both ROA and ROE which may reflect managers' tacit knowledge. Firms should cultivate stability within its managerial staff. To aid future growth, management must secure the proper combination of debt to equity funding. Contribution & Value Added: This article confirms past findings of internal predictors of ROA and ROE in banking. It is one of the first studies to examine predictors of ROA and ROE for firms in the insurance industry. Article type:research article

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Section: Introductionmentioning

confidence: 99%

Predictors of Return on Assets and Return on Equity for Banking and Insurance Companies on Vietnam Stock Exchange

Pointer

Khoi

2019

EBER

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“…In this research, a contagion impulse is investigated which is defined as process of shock transmission across the markets. This effect could be the consequence of asymmetric information resulting from changes in asset correlation coefficients, Wang and Lai (). Many authors, inter alia, Longin and Solnik (); Mun (); Chang and Su () found asymmetric volatility in the conditional variances of financial assets.…”

Section: Methodological Approachmentioning

confidence: 99%

Dynamic Correlation Between Stock Returns and Exchange Rate and Its Dependence on the Conditional Volatilities – The Case of Several Eastern European Countries

Živkov

Njegić

Pavlović

2015

Bulletin of Econ Res

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The objective of the paper is to determine whether the linkage between stock returns and exchange rates in several Eastern European countries was in accordance with the flow oriented model or the portfolio-balance approach. The dynamic interdependence between exchange rate and stock returns is determined using the Dynamic Conditional Correlation (DCC) framework. The results pointed to a negative dynamic correlation which is in line with portfolio-balance approach. Rolling regression revealed that conditional correlation was affected primarily by conditional volatility of currency, while the impact of stock returns volatility was negligible. S28Dynamic Correlation Between Stock Returns and Exchange Rate S29 the portfolio-balance approach. The flow oriented model asserts that appreciation/depreciation of domestic currency decreases/increases the international competitiveness which eventually influences the balance of trade position as well as country's output. Higher/lower cash flows of companies are consequently transferred to the higher/lower values of stock prices. This stance focuses on the current account of the country's trade balance and advocates a positive correlation between two variables. On the other hand, portfolio-balance approach accentuates country's capital account and demand/supply on the stock markets as well as currency market. It predicts that currency depreciation will cause lower demand of domestic stocks which eventually diminishes their value, while currency appreciation will render the opposite effect. Consequently, portfolio-balance approach advocates negative correlation between these categories.This paper analyses the dynamic interdependence between exchange rate and stock returns in four major East European emerging countries (the Czech Republic, Hungary, Poland and Russia) which did not conduct the policies of the fixed exchange rate in the observed period. Some of those countries have led a de facto flexible exchange rate (the Czech Republic and Poland), while Hungary has pursued a fixed regime with wide bands. The Russian currency was characterized by tight management until 2008, followed by greater flexibility afterwards. The paper has a three-fold contribution. Firstly, it supplements the existing literature on this topic. As claimed by Ulku and Demirci, (2012), there is a lack of research conducted on correlation between stock markets and exchange rates in European emerging markets. Secondly, the analysis is done by using Dynamic Conditional Correlation (DCC) multivariate GARCH models developed by Engle (2002), which could indicate a more direct interdependence between these two assets. This particular approach allows the correlations to change over time, utilizing the flexibility of univariate GARCH but without the perplexity of conventional multivariate GARCH. It implies computational advantages of DCC model over multivariate GARCH models, meaning that the number of parameters to be estimated in the correlation process is independent of the number of series to be correlated, En...

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“…To understand the expected risk premium in emerging markets we must first point out that emerging markets differ significantly from developed markets. Overall, emerging markets are less developed; have a lower quality of governance; a higher country credit risk; show more mutual synchronous market movement, as reported by Randall Merck, Bernard Yeung, and Wayne Yu (2000), Nikola Gradojević and Eldin Dobardžić (2013); are exposed to contagion risk, as argued by Kuan-Min Wang and Hung-Cheng Lai (2013); are facing illiquidity, shown by Boško Živković and Jelena Minović (2010); and have a smaller influence of individual stock characteristics. They also have higher market concentration with small samples of firms accounting for large proportions of aggregate market values, in the structure of financial intermediation dominating the banking sector, unlike the US where financial markets have dominance in the financial architecture.…”

Section: Ex-ante Equity Premium As a Price Of Equity Risk: An Importamentioning

confidence: 96%

Ex-ante equity risk premia: Expectational estimates using stock market returns forecasts in the emerging equity market

Naumoski

Nestorovski

2018

Panoeconomicus

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We estimated the ex-ante equity risk premium for the Republic of Macedonia, which is a young, small and open emerging market. We polled academics and practitioners for their expectations on the stock market index MBI10 as a proxy for market portfolio. The risk premium is the expected MBI10 return relative to a government bond yield. Using the Kolmogorov-Smirnov and Anderson-Darling goodness-of-fit tests we determined the best fitted statistical distribution, and consequently estimated the short-term ERP of 8.55 and long-term average ERP for the next 10 years of 7.76. The estimated ex-ante ERP is higher and similar as it is in the other emerging markets.

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Which global stock indices trigger stronger contagion risk in the Vietnamese stock market? Evidence using a bivariate analysis

Cited by 12 publications

References 35 publications

Predictors of Return on Assets and Return on Equity for Banking and Insurance Companies on Vietnam Stock Exchange

Predictors of Return on Assets and Return on Equity for Banking and Insurance Companies on Vietnam Stock Exchange

Dynamic Correlation Between Stock Returns and Exchange Rate and Its Dependence on the Conditional Volatilities – The Case of Several Eastern European Countries

Ex-ante equity risk premia: Expectational estimates using stock market returns forecasts in the emerging equity market

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