(TIỂU LUẬN) ASSIGNMENT REPORT STUDY THE IMPACT OF GOLD, OIL, GAS PRICE AND EXCHANGE RATE ON VN INDEX 2001 2021

FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS =====000===== ASSIGNMENT REPORT STUDY THE IMPACT OF GOLD, OIL, GAS PRICE AND EXCHANGE RATE ON VN-INDEX 2001-2021 Class: KTEE310.1 Instructor: Ph.D Vu Thi Phuong Mai Group of students: Group 14 - Ta Phuong Mai: 1234565432345 2014340207 - Nguyen Minh Hanh: 2014340203 2345654343 - Le Mai Anh: 2345654345654 2012340003 - Tran Hoang Minh: 2345654345 2011340205 OCTOBER 2021 INTRODUCTION CHAPTER 1: RESEARCH OVERVIEW 1.1 Overview of stock market 1.2 VN-Index 1.3 Formula 1.4 Factors affecting the VN-index used in the report 1.4.1 Gold price 1.4.2 Oil price 1.4.3 Exchange rate 1.4.4 Gas price 10 CHAPTER 2: RESEARCH METHOD 11 2.1 Research method and data 11 2.1.1 Research method 11 2.1.2 Data description 11 2.2 Building model 12 2.2.1 The population regression function model 12 2.2.2 Sample regression function model 12 2.2.3 Data description of the model 12 2.2.3.1 Statistics description 12 2.2.3.2 Matrix correlation between variables: 12 CHAPTER 3: ESTIMATED MODEL AND STATISTICAL INTERFERENCES 15 3.1 Initial estimated model 15 3.2 Testing and fixing problems of the model 16 3.2.1 Model testing 16 3.2.1.1 Test the statistical significance of the regression coefficients 16 2.1.2 Testing the suitability of the model 16 3.2.1.3 Testing Ramsey RESET’s test 18 3.2.1.4 Testing Heteroscedasticity 19 3.2.1.5 Testing multicollinearity 21 3.2.1.6 Testing autocorrelation 23 3.2.2 Fixing the problems of the model 24 3.3 Hypothesis testing 26 3.3.1 Hypothesis testing of regression coefficient 26 3.3.2 Test the statistical significance of the regression coefficients 26 3.3.3 Test the suitable of the model 26 LIST OF TABLE Table Data description 11 Table Statistics description 13 Table Matrix correlation between variables 13 Table Results of initial regression parameters 15 Table Results of the initial estimated coefficients 15 Table Regression model after removing lnoil variable 17 Table Ramsey’s reset test results 18 Table Heteroscedasticy result by White test 19 Table Robust test 20 Table 10 Multicollinearity test results by vif 20 Table 11 The regression model after removing lnExr 21 Table 12 Breusch-Godfrey Autocorrelation Test 22 Table 13 Regression with Newey-west standard errors 25 INTRODUCTION The stock market plays an extremely important role in the economic development of a country Stocks and stock markets are measures of the strength of the economies of many countries around the world Indicators or stock prices help to show the health of a country's economy Vietnam's stock market has developed rapidly in recent years The Ho Chi Minh City Securities Center (the forerunner of the Ho Chi Minh City Stock Exchange, or HOSE) held its first trading session in July 2000, marking the birth of Vietnam’s securities market Two decades later, the market has affirmed its role as an effective capital mobilising channel for the economy, contributing significantly to the equitisation of State-owned enterprises (SOEs), together with the bank's credit system to create a more efficient and balanced Vietnamese capital market structure that support the development of an entire economy The stock market is affected by many factors at once No single factor can affect the stock market Instead, many factors come together to form an overall investment environment and impact the stock market Therefore, to predict the future of the stock market, the impact of macroeconomic factors on the stock market needs to be carefully analyzed Understanding the relationships between these variables and the stock market index assists investors in making investment decisions and helps policymakers in designing policies in order to maintain market stabilization For the reasons stated above, as well as a desire to get a better grasp of economic challenges in the stock markets, we investigate the issue of "Factors Affecting VN-index from 2001 to 2021" in order to examine macro factors affecting the VN-Index stock and, as a result, providing suggestions for macroeconomic development and improvement of management policies in Vietnam Objectives of the study The essay aims to understand and clarify the factors affecting the stock market of Vietnam in the period 2001-2021; namely: oil price, gas price, gold price and exchange rate; from there, evaluating the influence of these factors on the VN-Index To achieve the above goal, the research team has read and researched the previous topic and related theories and tested these theories in the field Research object and scope Research object: Factors affecting the VN-Index, specifically: oil price, gas price, gold price and exchange rate Research scope of time: From January 2001 to October 2021 Research scope of space: Vietnam Limitations and difficulties in conducting research During the research process, due to lack of experience and knowledge, the essay has not been able to analyze all aspects of the problem in depth Moreover, the stock market is also affected by many other factors but adding new variables to the model can cause many defects and make the verification process more difficult and complicated Therefore, we look forward to receiving your suggestions to improve the essay Essay structure The essay consists of chapters Chapter 1: Research overview Chapter 2: Building model Chapter 3: Statistical evaluation and analysis results CHAPTER 1: RESEARCH OVERVIEW 1.1 Overview of stock market: Stock market is a place where shares of public listed companies are traded The primary market is where companies float shares to the general public in an initial public offering (IPO) to raise capital A stock exchange facilitates stock brokers to trade company stocks and other securities A stock may be bought or sold only if it is listed on an exchange Thus, it is the meeting place of the stock buyers and sellers A stock market index, also known as a stock index, measures a section of the stock market In other words, the index measures the change in the share prices of different companies The stock index is determined by calculating the prices of certain stocks (generally a weighted average) It is a tool widely used by financial institutions and investors to compare the return on specific investments and to describe the market, help track market trends and measure changes Currently, methods such as the Passcher method, Laspeyres method, Fisher average price index method, simple average digital method, and simple geometric average method are widely used in generating stock price indexes The VN-Index is an index that has a significant impact on investor psychology For this research, we will use VN-index to represent the Vietnamese stock market 1.2 VN-Index: The VN-Index is aggregated and calculated based on the daily price movements of all companies listed on the Ho Chi Minh Stock Exchange Ho Chi Minh City (HOSE) VnIndex is used to analyze and evaluate market volatility and help investors make investment decisions City Securities Trading Center Ho Chi Minh City Stock Exchange (HOSE) is the first centralized securities trading organization in Vietnam and held the first trading session on July 28, 2000, marking the official birth of the Ho Chi Minh Stock Exchange securities (stock market) in Vietnam 1.3 Formula: VN-Index = (CMV / BMV) x 100 CMV = ∑pit x qit BMV = ∑pio x qio Contain : - CMV: The current market capitalization - BMV: The value of the market capitalization - is adjusted in cases such as new listing, delisting and cases of change in listed capital - pit: The price of stock i at the time of calculation - qit: The listed volume of stock i at the time of calculation - pio: The price of stock i at the base time - qio: The listed volume of stock i at the base time 1.4 Factors affecting the VN-index used in the report In fact, the VN Index is affected by many factors However, for knowledge, our ability to gather and find information is limited, so in this report, we just focus on few macroeconomic variables to consider the correlation: oil price, gas price, gold price and exchange rate 1.4.1 Gold price Gold is a precious metal, used in jewelry, medicine, and industry Gold has high chemical stability with a shiny appearance Pure gold has high ductility, is easy to be laminated into foil and spun, so it is very suitable for making jewelry, components and electronic circuits.With its preeminent and widely recognized properties, gold has become a special material in the form of a commodity - currency When playing the role of money, gold has had all the functions of money in general and to this day, there is no currency with such full functions, including the function of means of payment, a measure of value and means of storage Traditionally, gold has been an indicator of future inflation, acted as a hedge against inflation, an important asset in portfolio allocation and has shown its role in crises, because gold creates a hedge to diversify the increasing risk in the market during the crises Central banks and international financial institutions retain a large amount of gold for diversification, and economic security 1.4.2 Oil price: Oil is one of the very important input materials of most industries in the economy and has a direct impact on the economy as well as the stock market in countries Studies in the world have shown that oil price is a factor affecting macro variables and profitability on the stock market through analyzing the impact of oil prices on industries and inflation in the economy (Hamilton, 1983; Burbridge and Harrison, 1984; Gisser and Goodwin, 1986; Ciner 2001; Miller and Ratti, 2009) Vietnam has the second largest oil reserves in East Asia, after China With export turnover accounting for an increasingly high proportion of crude oil, oil price is increasingly important for the economy as well as the stock market of Vietnam Oil prices can affect stock market volatility, both directly and indirectly The direct effect can be explained by the volatility of oil prices creating uncertainty in financial markets, which in turn leads to a decline in the prices of securities The indirect effect of oil prices is described through a decrease in production output and an increase in the rate of inflation when oil prices rise This affects the macro variables of the economy and thereby affects the stock market 1.4.3 Exchange rate: An exchange rate is the value of the US dollar against other currencies The value of the dollar is caused and reflected by interest rates, and interest rates are very much related to stock prices Therefore, the exchange rate will affect the stock market and can be used to predict the market Some studies have eased symmetric assumptions and found support for the asymmetric effect of exchange rate changes on stock prices (Bartram, 2004; Hsu et al., 2009; Koutmos & Martin, 2003; Miller & Reuer, 1998; Nguyen & Do, 2020) The exchange rate can have two different effects on stock prices When the exchange rate rises in a direct manner, the local currency is lost, as well as the stable investment climate that attracts more capital from international investors seeking profit and price discrepancy in the country The stock market, on the other hand, suffers as a result of the increased exchange rate When the exchange rate is adjusted, it has an impact on exports, which has an indirect impact on the company's economic growth and manufacturing operations, reducing stock prices 1.4.4 Gas price Gas prices indirectly, rather than directly, affect stock markets Increases in natural gas prices appear to impact industrial manufacturing growth, which, in turn, influences stock prices An increase in the price of an imported commodity such as crude oil and gasoline will increase the input costs of the economy, increasing pressure on prices Price pressure increases, while earnings are not expected to improve, will adversely affect GDP growth momentum.On the other hand, the increase in the import price of crude oil and gasoline of all kinds also contributed to the increase in the trade deficit, thereby putting pressure on the VND/USD exchange rate 10 Unexplained residual is n - k - = 245 (where k = is the number of independent variables model, n = 250 is the number of observations) The critical F value is 78.17 okay used to check the fit of the model ● R-squared coefficient of determination and adjusted R-squared ● The coefficient of determination R-squared = 0.5607 means that the independent variables in the model (oil price, gasoline price, exchange rate, gold price) explain 56.07% for the variation of the dependent variable stock price However, R-squared is a function that increases with the number of independent variables in the model, so when an independent variable is added, R-squared will increase whether that variable is really important or not, leading to the possibility of redundancy of variables and difficult to find out It is possible to compare the fit of models with the same dependent variable and different number of independent variables Then the adjusted coefficient of determination R-squared = 0.5736 is used to compare the fit of the models with different numbers of independent variables but the same dependent variable is stock price and the same sample size n = 250 ● The first model has variables: lngold, lnExr, lnoil ,lngas and lnVNI, but after running the regression model, the group found that the p_value of ln oil was high (p_value lnoil= 0.390 > 0.05), so the group decided to remove the lnoil variable for better results and model testing will not have many errors 3.2 Testing and fixing problems of the model 3.2.1 Model testing 3.2.1.1 Testing the statistical significance of the regression coefficients 16 Table Regression model after removing lnoil variable Purpose: Test for the statistical significance or the effect of independent variables on dependent one ● P-value of variable gold is 0.012 < 0.05 so has statistically significant = 5% with reliability coefficient = 95% => significant when p-value Reject Ho Therefore, the model has omitted variables 3.2.1.4 Testing Heteroscedasticity Hypothesis: { 𝑯𝒐: 𝑻𝒉𝒆 𝒎𝒐𝒅𝒆𝒍 𝒊𝒔 𝒉𝒐𝒎𝒐𝒓𝒐𝒔𝒌𝒆𝒅𝒂𝒄𝒊𝒕𝒚 𝑯𝟏: 𝑻𝒉𝒆 𝒎𝒐𝒅𝒆𝒍 𝒊𝒔 𝒉𝒆𝒕𝒆𝒓𝒐𝒔𝒌𝒆𝒅𝒂𝒄𝒊𝒕𝒚 By using command imtest,white in Stata, we have the result: Table Heteroscedasticy result by White test With the level of significance α= 5%, P-value=0,0000< 0,05 => Reject Ho Conclusion: There is heteroskedasticity in the model 19 Method: use Robust to fix the problem Table Robust test The model has BLUE quality but it still contains heteroscedasticity problem 3.2.1.5 Testing multicollinearity 𝑯𝒐: 𝑴𝒐𝒅𝒆𝒍 𝒉𝒂𝒔 𝒎𝒖𝒍𝒕𝒊𝒄𝒐𝒍𝒍𝒊𝒏𝒆𝒂𝒓𝒊𝒕𝒚 Hypothesis : { 𝑯𝟏: 𝑴𝒐𝒅𝒆𝒍 𝒅𝒐𝒆𝒔 𝒏𝒐𝒕 𝒉𝒂𝒗𝒆 𝒎𝒊𝒍𝒕𝒊𝒄𝒐𝒍𝒍𝒊𝒏𝒆𝒂𝒓𝒊𝒕𝒚 If Mean VIF>10 => Multicollinearity does exit Using command vif in Stata, we have the results: Table 10 Multicollinearity test results by vif 20 We can see that : VIF(lnExr) 10.81 > 10 VIF(lngold) 7.51 < 10 VIF(lngas) 2.39 < 10 Mean VIF 6.91 > 10 The model contains multicollinearity as VIF of lnExr variable is 10.81 > 10 After reducing to variables, our team found that the p_value was fine, R2 was fine, the test had Heteroscedasticity problem but it was fixed in time However, the team found that the model had multicollinearity because of the high VIF, so one more variable was removed Because the VIF of lnExr is approximately 10, it is acceptable Therefore, we return to the 3-variable model After running the regression model of variables as well as other tests, the team found that the indexes are all beautiful and stable, the phenomenon of multicollinearity has been overcome Table 11 The regression model after removing lnExr 21 3.2.1.6 Testing autocorrelation 𝑯𝒐: 𝑻𝒉𝒆 𝒎𝒐𝒅𝒆𝒍 𝒉𝒂𝒔 𝒏𝒐 𝒂𝒖𝒕𝒐𝒄𝒐𝒓𝒓𝒆𝒍𝒂𝒕𝒊𝒐𝒏 Hypothesis: { 𝑯𝟏: 𝑻𝒉𝒆 𝒎𝒐𝒅𝒆𝒍 𝒉𝒂𝒔 𝒂𝒖𝒕𝒐𝒄𝒐𝒓𝒓𝒆𝒍𝒂𝒕𝒊𝒐𝒏 Use Bgodfrey command to test autocorrelation by Breusch – Godfrey test with hypothesis Ho: No autocorrelation and 5% significance level Select the time series variable as the month variable Command: tsset month Result: time variable: month, from to 250, distance: unit Breusch – Godfrey test with degrees are 1, and Command: bgodfrey, lag(1) Table 12 Breusch-Godfrey Autocorrelation Test The model has autoregression problem 22 3.2.2 Fixing the problems of the model Through the testing process, we determine the sample regression model encounters defects: - The model has an omitted variable Although the model is good, it may still be missing variables because the Y variable is explained by many factors while the number of X variables in the article is limited, so the lack of variables is not a big deal - Multicolliearity problem The model has the phenomenon of variable variance, the OLS estimates for the coefficients are still unbiased estimates, only the variance of the estimated coefficients and the covariance between the estimated coefficients are obtained by the OLS method is biased Remedy: using strong standard error method Robust Standard: still using the estimated coefficients from the OLS method, but the variance of the estimated coefficients is recalculated without using the variance hypothesis error is unchanged The strong standard error model estimate will give a true estimate of the standard error which accepts the presence of variable variance, but will bring the estimated regression coefficient variance asymptotically with its true value Fixing multicollinearity by using robust standard 23 Correction results by robust standard error method: The point estimates of the coefficients are completely similar to conventional OLS regression, but the standard errors in the results have taken into account the problem of variable variance and normal distribution There is a change in the standard error and the t-statistic (but no change in the coefficient value) F - observation has been reduced from the original value and the variance of the estimated regression coefficient has been brought close to its true value • The model has autocorrelation problem To fix the problem of autocorrelation, we apply the Regression with NeweyWeststandard errors Using Stata to form a new regression model by the command “ newy lnVNI lngold lngas,lag(0)”, we get a new result: 24 Table 13 Regression with Newey-west standard errors The newly established model is: ln(VNI) = 1.077918+ 0.383377.ln(gas) + 0.7048492.ln(gold) + 𝐮𝐢 3.3 Interpret the results With R-squared = 0.5706 , the independent variables considered (gasoline price, oil price, gold price, exchange rate) explain 57.06% of the change of the dependent variable of stock price • The significance of the regression coefficients in the model is as follows: Intercept coefficient of the model: -34762.62 • The regression coefficient of gasoline price variable is 0.2873182 which means that, assuming other factors are constant, if gasoline price increases by 1%, the average domestic stock price will increase by 0.2873182/100 units Regression results show a positive correlation between gasoline prices and domestic stock prices • The regression coefficient of the exchange rate variable is 1.1574141, which means that, assuming other factors are constant, if the exchange rate increases by 1%, the domestic gold price will increase on average 1.1574141/100 units taste 25 The results also show a positive correlation between exchange rates and stock prices • The regression coefficient of the gold price variable is 0.4403601 which means that, assuming other factors are constant, if the gold price increases by 1%, the average stock price increases by 0.4403601/100 units The regression results of this variable show a positive correlation between the world oil price and the gold price of Vietnam Thus, the initial statement about the sign of the independent variables on the dependent variable is the main one accurate and consistent with the estimated regression results 3.4 Policy recommendations The research results show that stock price indices are influenced by four factors such as gold price, exchange rates, gas price and oil price On this basis, we propose a number of policies to increase the positive impact and limit the negative impact of these factors on the stock price indexes on HOSE For the Government In the coming time, in order for the stock market to operate in a healthy, stable and firm manner, truly becoming a medium and long-term capital channel for the economy, we must take into consideration the following key solutions: Firstly, ensuring macroeconomic stability In fact, Vietnam's stock market shows that the fluctuations in stock prices have a lot of reasons from macroeconomic stability Therefore, the Government should pay attention to improving the quality of economic growth, ensuring sustainable development; Operating monetary policy flexibly and effectively, ensuring the stability of the monetary market, exchange rates in close coordination with fiscal policies; Continuing to accelerate the equitization of state enterprises, divestment of non-core investment according to the approved plan 26 Secondly, continuing restructuring the stock market In order to further improve the role of the stock market, strive to make this market become a leading medium and long-term capital channel by 2020, continue to promote restructuring the stock market, the Ministry of Finance should focus on completing the system of legal documents; Continuing to restructure goods base in the direction of improving quality; Completing the trading system, associating equitization with transactions on The organized market; Implementing solutions to upgrade Vietnam stock market Thirdly, it is necessary to raise the standards listed on the stock exchange to improve the quality of listed goods, to avoid affecting the overall reputation of the market For the State Bank Exchange rates are not the cause of the trade deficit, so dumping is not a necessary measure during this period The dollarization of Vietnam is strongly influenced by exchange rate factors, so maintaining a stable exchange rate will contribute to reducing dollarization In order to maintain a stable exchange rate, this study recommended three groups of recommended solutions for the State Bank, including the following: Selection of mechanisms and instruments to manage exchange rate policies; Preventing dollarization of the economy; Managing exchange rate policy to increase people's confidence in VND Because the macroeconomic variables all affect the fluctuations of the exchange rate and vice versa, the policies of the State Bank should implement in asynchronized, consistent and flexible manner to ensure the initial objectives For Businesses The extent of the impact of inflation on the profits of large/small companies depends on two factors The first is the ability to limit the price increase from the supplier The second is the ability to price higher products that customers still accept Therefore, the company needs to make sure that input costs increase more slowly than the price increase Meanwhile, exchange rates and gold prices always fluctuate flexibly according to the market, so in order to survive and develop well, businesses need to properly analyze, forecast, identify and offer flexible solutions to respond to market changes 27 RECOMMENDATION AND CONCLUSION Recommendation Exchange rates: A falling dollar means that goods abroad are very cheap, and it also means that imported goods are more expensive This will cause consumers to buy domestic goods Money has no value so the economy will be expanded, many businesses will build equity, expand production and continue to borrow money In the short term, a currency with a low value will cause the price of shares in the stock market to escalate Gold price: When participating in transactions of buying and selling bonds, stocks, etc., investors' psychology is to set the growth expectation of these securities in the future If the market has risk factors that reduce investors' expectations, they will withdraw capital and sell off to get money for other better channels Gold price increases too quickly, which means that the current selling volume is very large, supply is more than demand, causing stock indexes to decline, causing market turmoil, price list dyeing a bright red color and VN Index in danger of touching bottom / bottom out There are also exceptions where the relationship between stock indexes and gold is not as strong as it once was Although the indexes have been reduced during the current outbreak, investors have not yet panicked to the point of selling out to buy gold, because they have high expectations that the economy will develop better after the pandemic Therefore, the current gold price is rising very high does not mean that the stock market is in a serious crisis Oil and gas price: Oil and gas price has an impact on the stock market but this is a small impact and does not have a serious impact on the stock market, the stock market still operates quite independently from oil price movements as well as signals of the economy as the results of this study research has shown Partly because investors in the market still invest based on emotions and herd psychology and Vietnam's stock market is still quite primitive, so it moves not according to the laws of the economy but according to the walking theory more random and behavioral finance 28 Conclusion My team carried out an essay on the impact of some factors such as gold price and exchange rates to stock prices Tool could be elements: the oil price, gas price,gold price and exchange rates Analyzing the results of the SRF with the help of software Stata came to the conclusion: in range of research of account and the data, only element active to the stock is not statistically significant On the other hand, exchange rates is the factor that affect the stock prices the most Learning about the character's elemental influence on stock prices is an important step to gain knowledge so that it can help investors, gold trading enterprises predict the following movement and the government also come up with new policies Due to lack of experience and knowledge, the essay has not been able to analyze all aspects of the problem in depth Moreover, the stock market is also affected by many other factors but adding new variables to the model can cause many defects and make the verification process more difficult and complicated Therefore, we look forward to receiving your suggestions to improve the essay Sincere thanks to PhD Vu Thi Phuong Mai-Lecturer in Financial Econometrics of Foreign Trade University during the process of writing this essay 29 REFERENCES Linkage Between Exchange Rate and Stock Prices: Evidence from Vietnam, https://www.koreascience.or.kr/article/JAKO202034651879118.page Definition of 'Stock Market', https://economictimes.indiatimes.com/definition/stock-market Stock Markets, Banks, and Economic Growth, https://www.jstor.org/stable/116848 Oil Price Effect On The Stock Market, https://www.investopedia.com/ask/answers/030415/how-does-price-oil-affectstock-market.asp Stock prices and exchange rate, are they related? https://www.jstor.org/stable/41263367 Natural Gas Prices and Stock Prices, https://www.researchgate.net/publication/234065348_Natural_Gas_Prices_and_St ock_Prices_Evidence_from_EU-15_Countries 30 ... Businesses The extent of the impact of inflation on the profits of large/small companies depends on two factors The first is the ability to limit the price increase from the supplier The second is the. .. variables of the economy and thereby affects the stock market 1.4.3 Exchange rate: An exchange rate is the value of the US dollar against other currencies The value of the dollar is caused and reflected... 28 Conclusion My team carried out an essay on the impact of some factors such as gold price and exchange rates to stock prices Tool could be elements: the oil price, gas price, gold price and exchange