A Structural VAR Analysis between Vietnam Stock Market and Other Stock Markets

Abstract

The paper’s purpose is to investigate dynamics of the Vietnamese stock market with other stocks markets around the world since understanding the linkages is important for assessing investment and managing financial risk. To this end, we employed a structural Vector Autoregression (VAR) model to capture dynamic properties of these relationships. Impulse response analysis shows that the Vietnamese market has the highest response to shocks from markets of Australia, Hong Kong, Japan in Asia; from markets of UK and France in Europe; and from indices in the US of NYSE, Dow Jones. The decomposition of forecast variance confirms the leading role of Hong Kong and Australian markets as well as NYSE in terms of influencing the Vietnamese stock market. Our findings imply that the Vietnamese stock market is most sensitive to shocks from the US, UK, Australia, and Hong Kong.

Keywords: VAR, Vietnam stock market, emerging stock markets

JEL Classification: J15, C53