(Luận văn) the impacts of capital flows on vietnam stock market

INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS t to UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM ng hi ep VIETNAM- NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS w n lo ad ju y th yi pl n ua al THE IMPACTS OF CAPITAL FLOWS ON n va VIETNAM STOCK MARKET ll fu oi m at nh BY z z TRAN TUYET HANH k jm ht vb om l.c gm MASTER OF ARTS IN DEVELOPMENT ECONOMICS n a Lu n va re HO CHI MINH CITY, NOVEMBER 2012 t to UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS ng hi ep VIETNAM- NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS w n lo ad ju y th yi pl n ua al THE IMPACTS OF CAPITAL FLOWS ON n va VIETNAM STOCK MARKET ll fu m oi A thesis submitted in partial fulfilment of the requirements for the degree of at nh MASTER OF ARTS IN DEVELOPMENT ECONOMICS z z om l.c gm TRAN TUYET HANH k jm ht vb By n va DR NGUYEN HOANG VU an Lu Academic Supervisor: re HO CHI MINH CITY, NOVEMBER 2012 DECLARATION t to ng hi ep I hereby certify that the substance of the thesis has not already been submitted for any degree and is not being currently submitted for any other degree w n I also certify that, to the best of my knowledge, and help received in preparing the lo ad thesis and all sources used have been acknowledged in the thesis y th ju Signature yi pl ua al TRAN TUYET HANH n n va Date: ll fu oi m at nh z z k jm ht vb om l.c gm an Lu n va re ACKNOWLEDGMENTS t to ng I would like to express my gratitude to all those who gave me the possibility to complete hi i ep this thesis I am deeply grateful to my supervisor Dr Nguyen Hoang Vu from Department of w n Mathematic and Statistics, Dr Nguyen Trong Hoai-Vice President, Dr Pham Khanh Nam lo from Department of Development Economics , University of Economics Ho Chi Minh ad City whose support, stimulating suggestions and encouragement helped me in all the time y th ju of research for writing this thesis yi I am also very grateful to all lecturers of the Vietnam-Netherlands Programme for giving pl me knowledge and guidance to fulfill the M.A Programme al n ua I would like to thank all the members of the Vietnam-Netherlands Program, especially, n completion of the thesis va VNP Library for helping me to have necessary documents and research papers during my fu ll Finally, I am indebted to my parents whose love, sympathy and encouragement enabled me I am also thankful to my classmates for their warm oi at nh encouragement m to complete this thesis z z k jm ht vb om l.c gm n a Lu n va re t to ACRONYMS AND ABBREVIATIONS ng hi Foreign Portfolio Investment Foreign Direct Investment w ep FDI n FPI lo Foreign Indirect Investment ad FII pl Hochiminhcity Stock Exchange ua al Hanoi Stock Exchange n HNX Vietnam Stock Market yi HOSE World Trade Organization ju VSM y th WTO va Price-earning VN-Index Vietnam Index IPO Initial Public Offering OTC Over The Counter Market LDCs Less Developed Countries liP Index of Industrial Production VAR Vector Auto regression ADF Augmented Dickey Fuller pp Phillips Peron ECM Error Correction Model SBV State Bank of Vietnam sse State Securities Commission of Vietnam CPI Consumer Price Index n PIE ll fu oi m at nh z z k jm ht vb om l.c gm n a Lu n va re ABSTRACT t to ng This thesis investigates the impacts of FPI flows on Vietnam stock market (VSM) hi ep In other words, we aim to examine whether a long-run or short-run impact of FPI flows on VSM exists or not And, if any, how long does it take for changes to be w fully effective? We use the mol!thly time series data of VN-Index and FPI flows n lo from July 2000 to June 2012 to analysis In order to calculate the growth rate of ad y th VN-Index, we take logarithm ofVN-Index series and denote it as Delta-VN Then, ju we adopt various techniques on time series regression such as unit root test using yi both Augmented Dickey Fuller (ADF) test and Phillips Peron (PP) test for pl ua al stationary, co-integration test using Engle &Granger approach and Johansen approach for examining the existence of a long-run relationship between two n n va variables, Granger Causality test for checking the existence and direction of ll fu causality relationship between them, error correction models for investigating the oi m existence of short-term relationship Moreover, we also apply Serial Correlation LM nh test, Heteroskedasticity ARCH test, Histogram Normality test to check the at appropriateness of the estimated model The research findings show that there is an z z unilateral effect from FPI flows on Vietnam stock returns The thesis also illustrates vb jm ht an existence of a long-run impact between them when an increase in FPI flows can lead to 86% of increase in Vietnam equity returns On the other hand, there is also a k om l.c third month gm short-run impact from FPI on VSM which would be decreasing gradually since the an Lu n va re TABLE OF CONTENTS t to CHAPTER INTRODUCTION ! ng hi 1.1 Problem statement ep 1.2 Research objectives w 1.3 Research questions n lo ad 1.4 Research scope y th 1.5 Structure of the thesis ju yi CHAPTER LITERATURE REVIEW pl ua al 2.1 The role ofFPI on economic development n 2.2 The role of Vietnam Stock Market va n 2.3 Theoretical framework fu ll 2.3.1Foreign Portfolio Investment and stock market m oi 2.3.2 Conceptual framework 11 nh 2.4 Empirical studies 13 at z 2.5 Suggested research model 15 z 2.6 Chapter remark 16 ht vb k jm CHAPTER3 RESEARCH METHODOLOGY&DATA COLLECTION 17 Econometric techniques 17 gm om l.c 1.1 Stationary and unit root tests 17 1.2 Co integration 18 a Lu 1.3 Granger Causality tests 18 n n va 3.1.4Error correction mechanism 19 3.2 Data collection 20 3 Data analysis 22 3.3.1 Dependent variable: Delta-VN 22 re • 3.3.2 Independent variable: FPI 23 t to 3.3.3 Interaction between FPI flows and VN-Index 23 ng hi 13.3 Chapter remark 33 ep CHAPTER EMPIRICAL ANALYSIS 35 w n 4.1 Structural Break Point test 35 lo ad 4.2 Unit root test 35 y th 4.3 Co-integration test 36 ju yi 4.4 Granger Causality test 38 pl 4.5 Error Correction Model 39 al n ua 4.6 Chapter remark 38 n va CHAPTER CONCLUSION AND POLICY RECOMMENDATIONS 43 ll fu 5.1 Main findings m oi 5.2 Policy recommendation 44 nh 5.3 Research limitation and suggestion for further study .45 at z z REFERENCES 46 vb DESCRIPTIVE STATISTIC 49 k jm ht APPENDIX A om l.c gm an Lu n va r LIST OF GRAPHS t to ng Graph 3.3-1: Delta-VN=log(VN-IndexJVN-Index(-1)) 22 I hi Graph 3.3-2: Foreign portfolio investment flows (FPI) to Vietnam from July 2000 ep to June 2012 23 w Graph 3.3-3: FPI&VN-Index from July 2000 to June 2012 24 n lo ad LIST OF TABLES ju y th Table 4.1-1: Summary of structural breakpoint test 35 yi 'fable 4.2-1: Summary of unit root test results 36 pl ua al Table 4.3-1: Summary of unit root test results for residuals using ADF&PP test: Engle &Granger test 36 n va n Table 4.3-2: Summary of Johansen cointegration tes~··················································· 37 fu ll Table 4.3-3: Summary of Trace Statistic value 38 oi m Table 4.4-1: Summary of Granger Causality test 38 nh at Table 4.5-1: Summary of testing Vector Error Correction Model 39 z z Table 4.5-2: Summary of the tests for approriateness of the estimated model 41 k jm ht vb om l.c gm an Lu n va r LIST OF FIGURES t to ng Figure A-1: Structural Breakpoint Test for Delta-VN variable 49 I hi ep figure A-2: Structural Breakpoint Test for fPI variable 49 figure A-3: Unit root test for Delta-VN variable 50 w n figure A-4: Unit root test for FPI variable 52 lo ad figure A-5: Cointegration test (Engle &Granger method) for residuals from the y th linear regression for two variables 54 ju yi figure A-6: Results of the Johansen Cointegration test for model2 55 pl al n ua figure A-7: Results of the Johansen Cointegration test for model3 57 n va Figure A-8: Results of the Johansen Cointegration test for model4 58 ll fu Figure A-9: Results of the Granger Causality test 59 oi m figure A-1 0: Results of the Vector Error Correction Model 60 nh Figure A-ll: Results of the Wald test 61 at z Figure A-12: Results of the Serial Correlation test 61 z vb jm ht Figure A-13: Results of the Heteroscedastiscity test 63 Figure A-14: Results of the Histogram Normality test 64 k om l.c gm an Lu • n va r