An empirical investigation of factors affecting stock prices in Vietnam

n the VN-Index and the S&P 500 Index was very high before the Global Financial crisis of 2008, and relatively high during and after the crisis. In addition, the re- sults of the correlation test also indicate that the VN-Index is highly correlated with gold prices and the US Dollar - VN Dong exchange rates in the first sub-period (1/4/2005 – 12/28/2007). Secondly, the empirical results of bivariate cointegration tests indicate a very low degree of integration between the VN-Index and the prices of the others for the period 2005-2012. There is only one cointegrating equilibrium at the 5% level between the VN-Index and crude oil prices. The results are consistent with (Narayan and Narayan, 2009). Therefore, it can be concluded that the VN-Index and crude oil prices are cointegrated for the whole peri- od. Moreover, there is one cointegrating equi- librium at 0.05 level before the crisis and two cointegrating equilibriums at 0.05 level during and after the crisis between the VN-Index and the S&P 500 Index. Furthermore, the analysis also shows that the VN-Index is cointegrated with the US Dollar - VN Dong exchange rates, gold prices and oil prices during and after the crisis. In addition, the multivariate cointegra- tion tests show two cointegrating equations at the 0.05 level in the first sub-period and one Table 7: Granger causality test results Note: * and ** denote rejection of the hypothesis at the 5% and 1% level respectively. Null Hypothesis F-statistic Whole period First sub-period Second sub-period VN-Index does not Granger Cause S&P 500 0.48518 9.10210** 0.19866 S&P 500 does not Granger Cause VN-Index 1.04893 10.1539** 0.32815 VN-Index does not Granger Cause USD/VND 0.93236 0.02137 1.04715 USD/VND does not Granger Cause VN-Index 0.20041 8.22734** 1.78912 VN-Index does not Granger Cause Gold price 0.20153 1.44975 0.33275 Gold price does not Granger Cause VN-Index 0.97192 0.00337 1.42186 VN-Index does not Granger Cause Oil price 1.82438 3.04353 4.80186** Oil price does not Granger Cause VN-Index 3.08231* 4.82355* 0.06973 Journal of Economics and Development Vol. 16, No.1, April 201486 cointegrating equation at the 0.05 level in the second sub-period. Finally, the bivariate Granger causality tests reveal causality running from crude oil pric- es to the VN-Index in the whole period and in the first sub-period. Conversely, in the sec- ond sub-period, the VN-Index affects crude oil prices. In addition, in the first-sub period, the S&P 500 Index and the VN-Index affect each other significantly; the US Dollar - VN Dong exchange rates have a significant impact on the VN-Index. The above findings are meaningful for the governments’ decisions about monetary and fiscal policy because the exchange rate in Vietnam is not determined by the market, but mainly controlled by the government. The empirical analysis results provide impli- cations for investors who contemplate invest- ing in Vietnam’s stock market. The paper indi- cates a high level of correlation and cointegra- tion tie between the VN-Index and the crude oil price. In addition, in the short-term, investors can get more reference information by moni- toring the price movement of the S&P 500 In- dex and the US Dollar - VN Dong exchange rates. 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