Relationship between macroeconomic factors and the Vietnamese stock market's performance
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School of Business |
Master's thesis
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en
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51+0
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Abstract
Impact of macroeconomic indicators on the stock market is a popular topic in the financial and economic world. Various researches have been carried out in the past to study this impact in order to help investors and institutions in understanding the stock market behavior and making sound investing decisions based on macroeconomic climates. Not only does this knowledge help investors but it also benefits governments in adjusting economic and fiscal policies to regulate the markets and protect investors. A major portion of past literature was conducted on mature and developed regions like North American and European countries. There is a limited number of researches dedicating to study young markets such as Vietnam, even though it is one of the fastest growing economies in Southeast Asia. This paper, therefore, aims to contribute to the understanding of the relationship between the stock market and macroeconomic factors in the context of the Vietnamese stock market (VSM). By analyzing the monthly performance of 30 representative companies during the 2007-2017 period, this thesis finds that out of the three chosen key macroeconomic variables, two have a statistically significant impact on the stock market. It was concluded that exchange rate and consumer price index have a negative relationship with the VSM’s performance. Meanwhile, gold price index, though thought to be the performance indicator of an important asset class that affects securities, is a statistically insignificant factor as a result of the test. There are three methods employed for testing: pooled effect, fixed effect and random effect. The following three tests were applied after that to find out which model should be chosen: Hausman test (fixed effect versus random effect), Lagrange Multiplier test (random effect versus pooled effect) and F test (fixed effect versus pooled effect). The pooled effect model was trusted to give the best results. Several suggestions were made for future researches to deepen and expand the understanding of the relationship between macroeconomic factors and the stock market. In the time of digital gold and currencies, it is recommended that not only physical gold but also bitcoin should be studied as an independent variable that can impact share returns. Both crypto and securities markets are active in the country and share the flow of money from investors in both the short and long term.Description
Thesis advisor
Malo, PekkaKuosmanen, Timo