Dissertation

Impacts of macroeconomic factors on stock prices in Vietnam

Table of Content

Table of Content ........................................................................................................................ 1
List of Figures ............................................................................................................................ 4
List of Tables ............................................................................................................................. 5
Introduction ................................................................................................................................ 6
Rationales for chosen topic .................................................................................................... 6
Research Aim and Objectives ................................................................................................ 6
Research Approach ................................................................................................................ 7
Research Significant .............................................................................................................. 7
Research Structure ................................................................................................................. 7
Literature Review....................................................................................................................... 8
Macroeconomic Variables and Stock Market: Historical Overview ..................................... 8
Macroeconomic Variables and Stock Market: Literature Review ....................................... 10
Impact of real economic variables on stock market......................................................... 10
Impact of monetary factors on stock market.................................................................... 13
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Impact of other market factors on stock market .............................................................. 19
Interaction among different stock markets ...................................................................... 26
Research Methodology ............................................................................................................ 29
Research Strategy................................................................................................................. 29
Data Collection .................................................................................................................... 30
Data analysis ........................................................................................................................ 31
Pre analysis – testing:....................................................................................................... 31
Model testing ................................................................................................................... 32
Univariate time series model ........................................................................................... 32
Multivariate time series model......................................................................................... 33
GARCH model - Bollerslev (1986) ................................................................................. 33
Results and Discussion ............................................................................................................ 35
Pre analysis – Testing .......................................................................................................... 35
Distribution of VN-Index ................................................................................................. 35
Unit root test .................................................................................................................... 36
Co-integrated test ............................................................................................................. 37
Univariate Time Series Model for Vietnamese Stock Market ............................................. 39
Impacts of industrial out put ............................................................................................ 39
Impacts of trade balance .................................................................................................. 40
Impacts of inflation .......................................................................................................... 41
Impacts of money supply ................................................................................................. 42
Impacts of interest rate ..................................................................................................... 43
Impacts of oil prices ......................................................................................................... 44
Impacts of gold price ....................................................................................................... 45
Impacts of exchange rate ................................................................................................. 46
Impacts of Dow Jones index ............................................................................................ 47
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Multivariable Time Series Model for Vietnamese Stock Market ........................................ 48
Correlation coefficient matrix .......................................................................................... 48
Multivariable model ......................................................................................................... 49
GARCH model..................................................................................................................... 53
Distribution of ROR VN-Index: ...................................................................................... 53
Testing ROR market ........................................................................................................ 55
Discussion ............................................................................................................................ 60
Summary of results observed ........................................................................................... 60
Problem of the stock market: ........................................................................................... 61
Recommendations: ........................................................................................................... 64
Conclusion ............................................................................................................................... 67
References ................................................................................................................................ 68

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List of Figures

Figure 2-1 Money and stock market ........................................................................................ 13
Figure 3-1 Variable selection ................................................................................................... 30
Figure 4-1 Analysis of distribution of VN-Index .................................................................... 34

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List of Tables

Table 4-1 Unit root test ............................................................................................................ 35
Table 4-2 Co-integrated test..................................................................................................... 37
Table 4-3 Expected direction of variables ............................................................................... 37
Table 4-4 Impacts of industrial output on Vietnamese stock market ...................................... 38
Table 4-5 Impacts of trade balance on Vietnamese stock market ........................................... 39
Table 4-6 Impacts of inflation on Vietnamese stock market (from 1/2004 to 2/2013) ........... 40
Table 4-7 Impacts of inflation on Vietnamese stock market (from 1/2008 to 2/2013) ........... 41
Table 4-8 Impacts of money supply on Vietnamese stock market .......................................... 42
Table 4-9 Impacts of interest rate on Vietnamese stock market .............................................. 42
Table 4-10 Impacts of oil price on Vietnamese stock market ................................................. 43
Table 4-11 Impacts of gold price on Vietnamese stock market ............................................... 44
Table 4-12 Impacts of exchange rate on Vietnamese stock market ......................................... 45
Table 4-13 Impacts of Dow Jones index on Vietnamese stock market ................................... 46
Table 4-14 Correlation coefficient matrix ............................................................................... 47
Table 4-15 Results observed from multivariable regression ................................................... 49

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Introduction

Rationales for chosen topic
It was shown in Mankhoff (2010) that 100% of investors and fund management experts said
that the fundamental analysis accounted for over 60% of their decisions making. In addition
to that, technical analysis made up for 30% and cash flow analysis only below 10%, when
considering the long term, the proportion of fundamental analysis is even greater. The reason
for its highly accountable positioning was that fundamental analysis is of great economic
significance, which has been proved in practice (Kumar et al., 2012). In a stock company, the
analysis department is the backbone functional department in business operations (Reilly and
Brown, 2011; Sureshkumar and Elango, 2012; Xu et al., 2012). According to Effective
analysis activities will help enhance the company’s prestige, win the trust of investors, and
thereby improve the revenue as well as profits. In addition, it also helps companies to be more
proactive in controlling the unexpected situations and better at risk management. Because of
the key roles played through macro fundamental analysis in decision making, studying the
relationship between macroeconomic variables and stock market with a view to find solutions
to solve the problem is very practical and useful.
Research Aim and Objectives
The study presents the data which was actually tested in reality with the purpose to measure
the level of impact of (percentage) of each variable on the stock market in order to help
further improve the analysis. The objectives of this dissertation are listed as following:

Research Approach

Collect and filter the data with Excel and EViews.

Methods of analysis, statistics, comparisons, sample selection.

OLS model, GARCH, EGARCH.

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Research Significant
Through testing in reality, it is possible to give a relatively accurate number of the mutual
interaction between economic variables and trending behaviours in the stock market, which
helps demonstrate the very first overview when there are changes in macroeconomic policies,
such as the adjustment of exchange rates, interest rates, inflation etc. These problems occur
quite frequently in Vietnam.
Research Structure
The dissertation is structured as following:

Chapter 1: Overview of the dissertation

Chapter 2: General documents about foreign macroeconomic factors and the
impacts of these macroeconomic factors on stock prices.

Chapter 3: Present the relevant research methodologies used in this dissertation in
order to achieve the study purposes.

Chapter 4: Present results and discussion on macro factors influencing Vietnamese
stock market.

Chapter 5: Conclusion observed and recommendation proposed through the
dissertation.

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