International Financial Integration: Stock Return Linkage and Volatility Transmission between Vietnam and Other Advanced Countries.

Abstract

This paper investigates the interdependence between the Vietnamese stock market and other influential stock markets in terms of return linkage and volatility transmission covering the period including pre, during and post the 2008 Global Financial Crisis. A VAR model is used to estimate the conditional return linkage amongst these indices and a GARCH-BEKK model is employed to investigate the volatility transmission. We find evidence of statistically significant correlation, return spillover and volatility linkage between Vietnamese stock market with other leading stock markets of the US, Hong Kong and Japan. Moreover, we find that during the financial crisis, stock markets become more interrelated.

Keywords: Stock market linkage, Volatility transmission, VAR-GARCH, BEKK-GARCH

JEL Classification: F02, F21, F3, F4