Business research methods individual proposal report topic how lunar phases affect vietnam stock returns

VIETNAM NATIONAL UNIVERSITY — HO CHI MINH CITY INTERNATIONAL UNIVERSITY SCHOOL OF BUSINESS BUSINESS RESEARCH METHODS INDIVIDUAL PROPOSAL REPORT TOPIC: HOW LUNAR PHASES AFFECT VIETNA

VIETNAM NATIONAL UNIVERSITY — HO CHI MINH CITY

INTERNATIONAL UNIVERSITY SCHOOL OF BUSINESS

BUSINESS RESEARCH METHODS INDIVIDUAL PROPOSAL REPORT

TOPIC: HOW LUNAR PHASES AFFECT VIETNAM

STOCK RETURNS?

Student’s Name: NGUYEN LUONG KIM NGOC

Student’s ID: BAFNIU20360 Lecturer: Assoc Prof LE DINH MINH TRI

Ho Chi Minh City, Vietnam

June, 2023

Table of contents

[.s¬›r1o PadiddddidididdẢỎẢỎẢ 3 IN(et2:2i ƯiiiiiaiÝảẳdẦ 3

1 Prolems backgrounds and staf€Im€TI - ch ng hệt 3

2 Research ObjJ€CIV€ HH HH HH TH Tu HH HH vip 6

3 Research qU€sfÏO' nh TH HH TH 6

4 Significance of the researCH - - s21 2 nàn HH TH ng HH ng HH 6

TD Literature review nh.Ầ.Ồ aaa 6

1 Theoretical Background - .- cv ng ng TH ng HH HT ky 6 L9 án 6

b Concept of Behavioral Finance - + S222 TH HH 2 HH hư 8

c How lunar phases affect human emOfOTIS7 chư 8

d How emotions affect investors’ behavior? oo ieee eseceteeceneesneeneceeseeesneeeseeeenees 10

2 Related Studies nh ng gu nh HH TH TH HH Hi 11 (0000: 3v 12

HC -coin:daaaaiidddiii'ẢẢẢ 13

In 77 .dđäđAđŒ 13

II vn.-ạ)ti 13

P N‹ dêu :tcriaiáaáđd 14

Su c cố nố 15

4 Data Collection Methodd n2 HH HH TH HT HH Hư 15 1A u-‹(o.đaaiaiii3 15

TV References si “ it 15

*Note: I changed my topic from “How Music Sentiment affect Stock Returns?” into “How Lunar Phases affect Vietnam Stock Returns?” The reason why I changed my topic was I

could not collect data to measure music sentiment

Abstract

Lunar phases are thought to influence emotions and behavior, this notion extends back to

antiquity In fact, the word "lunatic" comes from the Latin word for moon, "luna" The

moon’s influence on the human body and mind is backed by anecdotal evidence as well as scientific study in psychology and biology Moreover, according to the findings, investor emotions not only play a large influence in market volatility and provide return predictability

in a form compatible with the correction of investor overreaction, but they are also a contrarian predictor of future returns And this paper is to analyze the relationship between lunar phases and stock returns

Keywords: lunar phases, emotions, behavior, stock returns

I Introduction

1 Prolems backgrounds and statement

The Moon is Earth's only natural satellite It is the fifth-largest moon in the Solar System, and the largest and most massive relative to its parent planet, with a diameter about one- quarter that of Earth (comparable to the width of Australia) The Moon orbits Earth at an

average distance of 384,400 km (238,900 mi), or about 30 times Earth's diameter It takes

the Moon 27.3 days to orbit Earth and 29.5 days to rotate once on its axis This means that the same side of the Moon always faces Earth The Moon is thought to have formed about 4.51 billion years ago, not long after Earth The leading theory is that the Moon formed from the debris left over after a Mars-sized body collided with Earth The impact blasted material into orbit about Earth and the material accreted and formed the Moon just beyond the Earth's Roche limit of ~2.56 Rz Giant impacts are thought to have been common in the early Solar System The Moon has been a source of fascination for humans for centuries It has been the subject of myths, legends, and stories The Moon has also been a source of scientific study In the twentieth century, humans landed on the Moon and explored its

surface The Moon continues to be a source of fascination and study now, scientists are

still learning about its formation, its history, and its composition The Moon is also a potential resource for future human exploration and colonization The Moon's gravity has a

significant effect on Earth, it causes the tides to rise and fall in our oceans and seas, and it

also stabilizes Earth's axis of rotation The Moon's gravity also helps to protect Earth from asteroids and comets This gravitational attraction is largest during the New and Full

3

Moons, resulting in the highest and lowest tides According to Marina Binding, a holistic health practitioner at Switchback travel, considering we humans are made up of 70%

water, it stands to reason that the Moon would have a similar effect on us It is believed that the New and Full Moons, like the tides, bring our emotions to the surface and heighten

our emotions What the science says: some researchers theorize that humans are reacting to subtle changes in the Earth’s magnetic field that occur with the Moon phases The salty water (which is electrically conducting) causes the Earth's magnetic field to vary when the oceans move with the tides These modifications have been found to influence our alpha brain wave activity Many investigations on moon influences in the physical and biological sciences have been done The impact of the moon on ocean tides is a well-known scientific phenomenon Similar "tides" exist in the atmosphere and even in the 'solid' earth's crust (Katzeff 1981, pp 97-102) Around new and full moons, a “high tide" in the earth's crust causes an exceptionally large number of earthquakes and volcano eruptions (Katzeff 1981,

pp 104-5) Hurricanes and other severe storms are statistically more likely to occur around new and full moons (Katzeff 1981, pp 109-110) Even in the now-defunct World Hockey Association, penalty minutes climbed dramatically on full moon days and plummeted below average on new moon days (Katzeff 1981, pp 184-86) Palmer's (2002) study on moon phenomena is one of the most interesting and thorough People interested in the scientific basis of the effect of cycles on all life forms should start with this small book

While many known lunar effects occur at or around new or full moons, others occur at or

near the waxing or waning quarter moons, or with a lead or lag to one of these phases Astrophysics gives a scientific explanation for moon impacts on human behavior and other occurrences in the sun's ejected “solar wind” of particles The gravitational field of the moon deflects solar wind on its route to Earth The movement of the solar wind causes a dramatic decrease in geomagnetic activity roughly five days before new and full moons Scientists have previously observed that such solar activity impacts the earth's magnetic field and that magnetic field variations influence plants, animals, and people (Katzeff

1981, pp 251-266)

In the economy, many people believe that investors’ financial behaviors are affected by mood Behavioral finance attempts to explain how cognitive errors and biases affect

investment beliefs, and hence financial choices This is in contrast to many traditional

theories which assume markets are always efficient “What defeats investors more than anything is psychology Specifically, they can be undone by the emotional ups and downs that accompany the ups and downs of the market For investors, it’s crucial that they

4

them to do precisely the wrong thing.” This is a quote of Michelle Perry Higgins — a financial planner about psychology affects the investors’ emotion Financial decisions of

investors not only affect the returns of stocks, but also affect the market In each case, a

psychological explanation links mood with market returns, and neuroeconomics research has focused on isolating areas of the brain responsible for the particular moods (cf

Camerer, Loewenstein, and Prelec, 2005)

The research about “Are Investors Moonstruck? Lunar Phases and Stock Returns” of Kathy Yuan, Lu Zheng and Qiaoqiao Zhu in 2002 showed how stock returns were influenced by moonday They find strong global evidence that stock returns are lower on days around a full moon than on days around a new moon They build a lunar trading strategy and discover that this return differential has an annual magnitude of about 4.2 percent Because moon phases are likely to be related to investor mood rather than economic activity The positive relationship they uncover between lunar phases and stock returns shows that it may be worthwhile to investigate the psychological impact of investor behavior on stock returns beyond a rational asset pricing framework In the research of Rayenda Brahmana, Chee-Wooi Hooy and Zamri Ahmad about Moon phase effect on investor psychology and stock trading performance in 2014 They show that via the time- series quasi experimental, cognitive and emotional disarray, aggression, and mood disorders have all been proven to play a role in affecting investors’ decision-making and delivering negative market returns Surprisingly, these correlations only occur on full moon days It is acceptable to conclude that the full moon phase manipulates investors’ emotions and cognition, resulting in aggression and mood disorders, which negatively affect stock trading through biased decision-making

In addition to the data provided by Hirshleifer and Shumway (2001) and Kamstra, Kramer,

and Levi (2003), it is likely that there are more widespread external influences, such as:

sunlight, seasons, weathers and so on, that have a consistent impact upon stock prices Humans are always affected by the environment and nature, the next natural step in this approach, given the history and persistent nature of theories regarding the influence of the lunar cycle on human behavior, seems to be to look into the effect of moon cycles on stock returns In confirming the effect of lunar phases on stock returns, these study suggests that other mood effects may be important For instance, a person would predict poorer returns

on full moon days if the full moon makes him depressed and pessimistic This is because

he may be more risk averse or have pessimistic projections of the future cash flows of

stocks

Consequently, the moon cycle and its associated nature activities might impact stock market activity by changing people's moods and behaviors

2 Research objective

This study aims to capture the relationship between lunar phases and the stock market returns This study will analyze investors in relation to trading behavior, and their emotion when conducting financial transactions

3 Research questions

(1) How lunar phases affect human emotions?

(2) How emotions affect investors’ behavior and stock returns?

(3) What is the relationship between lunar phases and stock returns?

4 Significance of the research

The importance of this proposal lies in its contribution to understanding how moon phases affect stock returns in the Vietnam market By concentrating on how human emotions are impacted by moon phases and how emotions influence investor behavior and stock performance

This study has the potential to make a significant contribution to the field of investment behavior research, particularly in Vietnam This information can be used to develop better investment strategies and to help investors make more informed investment decisions, giving individuals, concretely Vietnamese, new investing opportunities

II Literature review

This chapter reviews previous research on concepts, theories, and relationships between independent and dependent variables More importantly, it proposes the old and new research models as well as hypotheses that will be used in this study

1 Theoretical Background

a Concept of Lunar Phases

Lunar phases are the different shapes that the Moon appears to have as it orbits the Earth The Moon's phases are caused by the relative positions of the Sun, Earth, and Moon The Moon does not produce its own light, but rather reflects the light of the Sun As the Moon

orbits the Earth, different amounts of its sunlit surface are visible from Earth The eight

lunar phases are:

Oo

Oo

New Moon: The Moon is between the Sun and Earth, and we cannot see it from Earth

Waxing Crescent: The Moon is a thin crescent shape, and we can see a small

amount of its sunlit surface

First Quarter: The Moon is halfway between the Sun and Earth, and we can see half

of its sunlit surface

Waxing Gibbous: The Moon is more than half full, and we can see more than half

of its sunlit surface

Full Moon: The Moon is on the opposite side of the Earth from the Sun, and we can

see its entire sunlit surface

Waning Gibbous: The Moon is less than half full, and we can see less than half of its sunlit surface

Third Quarter: The Moon is three-quarters of the way between the Sun and Earth,

and we can see three-quarters of its sunlit surface

Waning Crescent: The Moon is a thin crescent shape, and we can see less and less

of its sunlit surface until it becomes a new moon again

The lunar cycle takes about 29.5 days to complete

Deke tty } MU Ta, Ôi

)

)

Waning Crescent

Third Quarter

Figure 1 Lunar phases Source: NASA/Bill Dunford Published: August 14, 2014

b Concept of Behavioral Finance

Behavioral finance, a topic of behavioral economics, claims that psychological factors and

biases influence investors’ and financial practitioners’ financial activities Furthermore,

effects and biases may be used to explain various forms of market anomalies, particularly market anomalies in the stock market, such as sharp jumps or dips in stock price Because behavioral finance is such an important component of investment, the Securities and Exchange Commission has employees dedicated to it

Behavioral finance may be studied from a variety of perspectives Stock market returns are one area of finance where psychological factors are frequently considered to impact market outcomes and returns, although there are many distinct perspectives to consider The goal of behavioral finance categorization is to help individuals understand why they make specific financial decisions and how those decisions influence markets

Heuristic Driven Biases

Anchoring &

Adjustment

Frame Dependent Biases

Loss Aversion

Mental Accounting Disposition Effect

Figure 2 Categorization of behavioral biases How lunar phases affect human emotions?

emotions:

The belief that the moon can affect human emotions is a long-standing one, dating back to ancient times Here are some of the possible ways that the lunar phases can affect human

O The light of the moon can disrupt sleep The light of the moon can make it difficult

to fall asleep and stay asleep This can lead to fatigue, irritability, and mood swings

The moon's gravitational pull can affect our bodies The moon's gravitational pull

is thought to affect our bodies in a number of ways, including our blood pressure, heart rate, and breathing These changes can lead to changes in mood

The moon's cycles can affect our hormones The moon's cycles are thought to affect our hormones, including estrogen and progesterone These hormones can play a role in our mood and emotions

each phase of the moon may impact our mood:

The moon's gravitational pull is responsible for the rise and fall of Earth's tides, and its precise location in its lunar cycle may have an effect on your general mood, whether you're feeling lethargic, nervous, productive, or all of the above Here is a look at how

1 New Moon: The new moon is a time of new beginnings It is a time to set intentions and goals for the month ahead Some people may feel more motivated

9

and inspired during this time Others may feel more anxious or stressed as they start to think about what the future holds

O Waxing Crescent: The waxing crescent is a time of growth and expansion It is a time to start taking action on our goals and intentions Some people may feel more optimistic and hopeful during this time Others may feel more impatient or restless

as they wait to see results

LH First Quarter Moon: The first quarter moon is a time of balance and equilibrium It

is a time to assess our progress and make adjustments as needed Some people may feel more grounded and centered during this time Others may feel more indecisive

or frustrated as they try to figure out what to do next

O Waxing Gibbous: The waxing gibbous is a time of excitement and anticipation It

is a time to see our goals coming to fruition Some people may feel more joyful and happy during this time Others may feel more overwhelmed or stressed as they start to feel the pressure of success

O Full Moon: The full moon is a time of culmination and completion It is a time to celebrate our accomplishments and reflect on our journey Some people may feel more energized and productive during this time Others may feel more drained or exhausted as they wind down from a busy month

O Waning Gibbous: The waning gibbous is a time of release and letting go It is a time to let go of what no longer serves us and make space for new beginnings Some people may feel more relaxed and at peace during this time Others may feel more sad or regretful as they say goodbye to the past

O Third Quarter Moon: The third quarter moon is a time of introspection and reflection It is a time to look back on our month and learn from our experiences Some people may feel more introspective and thoughtful during this time Others may feel more critical or judgmental as they analyze their own behavior

O Waning Crescent: The waning crescent is a time of closure and completion It is a time to let go of the past and move on to new beginnings Some people may feel more at peace and ready to start fresh during this time Others may feel more nostalgic or sentimental as they say goodbye to the past

It is important to note that these are just generalizations The way that the moon affects our mood is individual and unique Some people may not experience any changes in mood

at all, while others may find that their mood is significantly affected by the different phases of the moon

H1: Lunar phases affect human emotions