(Luận văn) empirical investigation of efficient market hypothesis in vietnam stock market

t to MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY ng hi ep w n lo ad ju y th yi pl n ua al LÊ ĐẶNG BÍCH THẢO n va ll fu EMPIRICAL INVESTIGATION OF EFFICIENT MARKET oi m HYPOTHESIS IN VIETNAM STOCK MARKET at nh z z k jm ht vb MASTER THESIS om l.c gm an Lu n va ey t re Ho Chi Minh City 2011 t to MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY ng hi ep w n lo ad y th ju LÊ ĐẶNG BÍCH THẢO yi pl ua al n EMPIRICAL INVESTIGATION OF EFFICIENT MARKET va n HYPOTHESIS IN VIETNAM STOCK MARKET ll fu oi m at nh z MAJOR: BANKING AND FINANCE MAJOR CODE: 60.31.12 z k jm ht vb an Lu Supervisor: Dr Võ Xuân Vinh om l.c gm MASTER THESIS n va ey t re Ho Chi Minh City 2011 Acknowledgement t to ng hi ep I would like to express my heartfelt gratitude and deepest appreciation to my research Supervisor, Dr Vo Xuan Vinh for his precious guidance, share of w experience, ceaseless encouragement and highly valuable advice and comments n lo throughout the course of my research ad y th ju I would like to thank many of my friends in our group from ebanking class, who yi have been sharing experience during doing research: Ms Nguyen Thi Kim Ngan, pl n Trinh ua al Ms Tran Thuy Huyen, Ms Do Ngoc Anh, Mr Ta Thu Tin, Ms Pham Thi Tuyet n va ll fu My special gratitude is extended to all instructors and staff at Faculty of Banking oi m and Finance Postgraduate Faculty, University of Economics HoChiMinh City at nh (UEH) for their support and the valuable knowledge during my study in UEH z z Finally, the deepest and most sincere gratitude goes to my parents, my sisters for vb jm ht their love and support Fulfilling this goal would not have been possible without them k om l.c gm an Lu n va ey t re i Abstract t to ng This research examines the efficiency of Vietnam stock market at weak form level hi ep by using daily and weekly observations of market index and eight selected stocks of real estate and seafood processing companies for the period from 2007 to 2010 w Parametric and nonparametric tests including auto correlation test, run test, variance n lo ratio test, regression test, ARCH, GARCH (1,1) have been employed in this study ad y th All tests’ results fail to support the hypothesis of weak form efficiency with daily ju data, even in case, returns are adjusted for thin trading However, with weekly data, yi results obtained from run test and autocorrelation test not completely reject pl ua al hypothesis of weak form efficiency while result given from variance ratio test fully n provides evidence against a random walk Besides that, the findings of no clear va calendar effect by examining day of week effect also give the evidence that even if n ll fu the anomalies existed in the sample period, the practitioners who implement at nh disappear oi m strategies to take advantage of anomalous behavior can cause the anomalies to z z vb k jm ht Keywords: efficient market hypothesis, randomness, calendar effect om l.c gm an Lu n va ey t re ii Table of contents t to ng Acknowledgement .i hi ep Abstract ii Table of contents .iii w List of tables v n lo Abbreviations vi ad y th INTRODUCTION ju LITERATURE REVIEW yi pl 2.1 The theory of Efficiency Market Hypothesis al n ua 2.2 Review of Literature on Weak Form Market Efficiency n va 2.2.1 Evidence from developed markets ll fu 2.2.2 Evidence from developing markets 10 DATA AND METHODOLOGY 14 oi m nh 3.1 Data Description 14 at z 3.2 Methodology 17 z ht vb 3.2.1 Auto Correlation Test 17 jm 3.2.2 Run test 19 k 3.2.3 Variance ratio test 20 gm l.c 3.2.4 Calendar effect 23 3.2.5 Thin trading adjustment 25 om 3.2.6 Robustness check 26 an Lu EMPIRICAL RESULT 27 n va 4.1 Autocorrelation Test 27 4.4 Day of week effects 44 iii ey 4.3 Variance ratio test 38 t re 4.2 Runs test 34 CONCLUSION 48 t to REFERENCES 50 ng Appendix 56 hi ep Table A Summary results of all tests for daily returns in 2007 56 Table A Summary results of all tests for thin trading adjusted daily returns in w n 2007 56 lo ad Table A Summary results of all tests for daily returns in 2008 57 y th Table A Summary results of all tests for thin trading adjusted daily returns in ju 2008 57 yi pl Table A Summary results of all tests for daily returns in 2009 58 ua al Table A Summary results of all tests for thin trading adjusted daily returns in n 2009 58 va n Table A Summary results of all tests for daily returns in 2010 59 fu ll Table A Summary results of all tests for thin trading adjusted daily returns in m oi 2010 .59 at nh z z k jm ht vb om l.c gm an Lu n va ey t re iv List of tables t to ng Table 3.1 Descriptive statistics of daily return 15 hi Table 3.2 Descriptive statistics of weekly return 15 ep Table 4.1 Results of autocorrelation coefficients and Ljung-Box Q statistics for w daily returns 29 n lo Table 4.2 Results of autocorrelation coefficients and Ljung-Box Q statistics for thin ad trading adjusted daily returns 31 y th ju Table 4.3 Results of autocorrelation coefficients and Ljung-Box Q statistics for yi weekly returns 32 pl ua al Table 4.4 Results of autocorrelation coefficients and Ljung-Box Q statistics for thin trading adjusted weekly returns 33 n n va Table 4.5 Results of run test for daily price & return 36 ll fu Table 4.6 Results of run test for weekly price & return 37 oi m Table 4.7 Variance ratio test results for daily returns under homoscedasticity and nh heteroscedasticity 40 at Table 4.8 Variance ratio test results for thin trading adjusted daily returns under z z homoscedasticity and heteroscedasticity 41 vb Table 4.9 Variance ratio test results for weekly returns under homoscedasticity and ht k jm heteroscedasticity 42 gm Table 4.10 Variance ratio test results for thin trading adjusted weekly returns under l.c homoscedasticity and heteroscedasticity 43 om Table 4.11 Results of OSL and GARCH (1,1) models for daily returns 46 an Lu Table 4.12 Results of OSL and GARCH (1,1) models for thin trading adjusted daily returns 47 n va ey t re v Abbreviations t to hi ep Ben tre Aqua product Import And Export Joint Stock Company AGF : An Giang Fisheries Import and Export Joint Stock Company ARCH : Autoregressive conditionally heteroscedastic : Ho Chi Minh City Infrastructure Investment Joint Stock Company : n ng ABT w lo CII ad EMH : Efficient Market Hypothesis y th GARCH : Generalised Autoregressive Conditional Heteroscedasticity ju : Sao Ta Foods Joint Stock Company HOSE : Ho Chi Minh Stock Exchange ITA : Tan Tao Investment Industry Corporation OSL : Ordinary Least Standard SJS : Song Da Urban & Industrial Zone Investment and Development Joint yi FMC pl n ua al n va ll fu oi m Stock Company : Thu Duc Housing Development Corporation TS4 : Seafood Joint Stock Company No at nh TDH z z k jm ht vb om l.c gm an Lu n va ey t re vi INTRODUCTION t to Efficient Market Hypothesis (EMH) has been a popular topic for empirical research ng hi since the introduction of market efficiency theory by Fama (1965) There are many ep studies examining whether the stock markets in both developed and emerging countries behave in line with the Efficient Market Hypothesis Most of them w n focused on weak form efficiency, the lowest level of Efficient Market Hypothesis lo ad and the results are mixed On the one hand, some studies reject the hypothesis that y th the stock markets are in the weak form efficiency (Hoque et al., 2007, Abeysekera, ju yi 2001b, Lima et al., 2004) On the other hand, some papers provide the evidence that pl stock markets in some countries are efficient (Chan et al., 1997, Lee, 1992, al n ua Worthington et al., 2004) va n Although there are many empirical studies devoted to testing for the weak form of fu ll Efficient Market Hypothesis in developed and emerging stock markets, there are not m oi many studies examining the weak form of market efficiency in stock returns in nh Vietnam market The objective of this study is to investigate the existence of weak at z form of market efficiency in stock returns in Vietnam, and whether there are any z ht vb anomalies existing in Vietnam stock market The discovery of anomalous patterns jm in stock returns can help investors take advantage of continuing to hold and adjust k their buying and selling strategies accordingly to increase their returns by timing the gm market om l.c Since the establishment on 28 July 2000 with the first security trading center in Ho an Lu Chi Minh City (hereinafter called Hose) and only two listed companies that are increased significantly to 635 companies with a total market capitalization of VND ey difficulties Over ten years of operation, the total number listed companies have t re market has continued to develop successfully by facing all the challenges and n and Telecommunication Material Joint Stock Company (SACOM), Vietnam stock va Refrigeration Electrical Engineering Joint Stock Company (REE) and Saigon Cable 650.150 billions (Hose VND 523.933 billions, HNX VND121.217billions) The t to market capitalization to GDP ratio has been increased year by year It goes up from ng 0.24% in 2000 to 0.37% GDP in 2010 There are 102 securities companies licensed hi ep with a total registered capital of VND 31,866 billion (USD 1,528 million) Total trading accounts are about 1,031,000 (including the 15,000 trading stock accounts w n of foreign investors), compared to the 2,908 accounts in 2000 The high and rapid lo ad growth of Vietnam stock market is, of course, very appealing to domestic and ju y th foreign investors yi pl Although Vietnam stock market has developed rapidly and taken liberalization ua al process recently, it still possesses many of features that are characteristics of n emerging markets like more information asymmetry, thin trading and weak va n institutional infrastructure, which all together could cause market inefficiency fu ll However, not all of emerging markets are entirely inefficient such as some m oi researchers who find the evidence to support the weak form efficiency in at nh developing countries: Lima et al.(2004) found that Hong Kong and A shares for both the Shanghai, Shenzhen stocks exchanges are in weak form efficiency z z Dickinson et al.(1994) also provided the evidence that Nairobi Stock Exchange is vb jm ht behave in line with the market efficiency and Moustafa (2004) also supported the weak form Efficiency Market Hypothesis of United Arab Emirates stock market… k l.c gm Hence, considering the theoretical and practical significance, the testable implications and conflicting empirical evidence of random walk hypothesis om motivate us to have a fresh look at this issue of weak form efficiency in the context an Lu of an emerging market, namely Vietnam stock market ey processing companies in Ho Chi Minh stock exchange from Jan 2007 to Dec 2010 t re of daily and weekly return of Vnindex and shares in real estate and seafood n existing in Vietnam stock market To analyze this issue, we require a decomposition va This study focuses on testing the weak form market efficiency and some anomalies