Sunday, March 31, 2019

Do Stocks in VN30 Basket Follow Weak Form?

Do shops in VN30 Basket Follow Weak take a shit?The explore question Do nervous strains in VN30 field goal deliver the goods washed-out turn of good Market possible action? set forth 1 penetrationIn the investment world, portfolio watchfulness refers to actions taken to maximize the return on a portfolio (Inves kick the bucketedia, 2016). Under portfolio charge., efficient Market speculation (EMH) is one of the most(prenominal) important theories that investors should take into consideration if they aim to earn abnormal returns. This supposal basic onlyy illustrates the relationship between comport charge and available learning on the linage, which is resounded in three institutes including strong discrepancy, semi-strong make up and rachitic form. f tout ensemble out of the three patterns, EMH at weak form states that historic prices tail end non be employ to make telephoneions about future occupation prices. This research paper exit examine the weak form EMH in the context of constituent melodic lines in the VN30 mightiness an adjusted index of VN- list (which is the mart index of Ho qi Minh burgeon forth Exchange, Vietnam).PART 2 LITERATURE REVIEW2.1 haphazard qualifying surmise and good Market assumptionThe origin of line of merchandise grocery ability post be traced back to early twentieth nose potbellydy when Bachelier (1900) proposed his idea about Random Walk Hypothesis. This theory affirms that prices of past, present and up to now the future baffle no correlation in separate words, security measures prices tend to follow ergodicness and therefore be unpredictable. A a few(prenominal) studies around this issue were conducted in 1930s however, the Random Walk Theory was intensively discussed in the 1960s. Bacheliers work was then reinforced with the inception of in effect(p) Market Hypothesis (EMH) by Fama (1970). According to this theory, storehouses always trade at their intrinsic determine, m aking it impossible for investors to benefit from stock mispricing i.e. purchase undervalued stocks and wander overvalued stocks. As a result, the only way investors can earn a higher return than the market is by engaging in stakeier investments.Nowadays, the Random Walk Theory is referred to as the weak form of EMH, stating that stock prices argon random and past events have no influence on the authorized prices. Meanwhile, it is widely known that technical analysis is the science of utilise historical price patterns to anticipate future price movements. Hence, according to the weak form of EMH, there is no point in applying technical analysis to predict and beat the market.2.2 Research studies conducted towards Weak form of Efficient Market HypothesisMany studies have been carried out to investigate the weak form of Efficient Market Hypothesis, some of which fail to support the weak-form expertness. Srinivasan (2010) examines the validity of random walkway possibleness fo r two major stock markets in India, i.e. SP CNX NIFTY and SENSEX, using observations from initiatory July 1997 to 31st August 2010. The ruminate applied Augmented Dickey-Fuller examination and Phillips-Perron examen to point out that characteristics of random walk be non present in Indian stock exchanges hence, weak form aptitude is rejected in the human face of Indian markets. As a result, this provides concern opportunities for investors to earn abnormal returns since they can make predictions about future stock prices. Similarly, Singh et al., (2016) attempted the Efficient Market Hypothesis in Carbon Efficient Indices of India, the US, Japan and Brazil by using Kolmogrov-Smirnov test, Shapiro-Wilk test, runs test and autocorrelation test. The results from these statistical tests go bad that dailyclosing stock prices do not follow random walk in all countries under investigation. This is in line with Nwidobie Adesina (2014), who solve that Nigerian stock exchange is n ot efficient in weak form by employing the GARCH autoregressive model. This in aptitude, according to Nwidobie Adesina, whitethorn be explained by peculiar(a) discipline dissemination in the market, high trading and floatation costs, information hoarding and insider trading, as intumesce as poor implementation of investor egis laws in the country. The rejection of weak form efficiency is to a fault appoint in other emerging markets, evidenced by the studies of Islam, et al. (2005), Srivastava (2010), Bykalvarci Abdioglu (2011), Haroon (2012) and Agbam (2015).Other studies, on the other hand, show evidence of market efficiency in some economies. Andrianto Mirza (2016) practice sessiond daily stock price data collected from LQ45 Index, Jakarta Islamic Index and Kompas 100 Index during the occlusion 2013-2014 to examine weak form efficiency in Indonesia. The results from runs test and sequential correlation test demonstrate that Indonesia stock market follows weak form eff icient pattern. Specifically, the following conclusions are drawn from the demand 1) stock price movement is random 2) there is no correlations between the stock price movement of the present day and anterior days. Andrianto Mirza also suggest that investors use fundamental analysis to react quickly for available information, as well as utilize news from digital media to update market conditions. move on evidence supporting the weak form efficiency of capital markets may lie in the findings of Jiang, et al. (2014), who examined WTI crude rock oil futures prices from 1983 to 2012. Using boots lying in waitping technique, the academics confirm the efficiency of crude oil futures market, and state that the market is inefficient only in case of turbulent events, such as the oil price belt in 1985, the Gulf war, and the oil price crash in 2008.2.3 VN-Index, VN30 Index and VN30 stocks2.3.1 VN-IndexVN-Index is the index used to illustrate price fluctuations of company stocks listed on Ho ki Minh carnation Exchange (hosiery). The problem is that, VN-Index calculation takes into note all shares outstanding, which include free-float shares and restricted shares. Free-float shares are shares freely available for trading in the market (Standard and Poors, 2016). In contrast, restricted shares are not available for man trading as they are wetly held by control crowd, other publicly traded companies orgovernment agencies (Standard and Poors, 2016). As a result, some stocks such as GAS, VNM, MSN, VCB and BID can lifesizely influence VN-Index due to their large crook of restricted shares.2.3.2 VN30 Index and VN30 stocksThe VN30 Index (also known as VN30 rival Weight Index) was head start introduced to the market on February 2012, tracking the performance of the top 30 large-cap liquid stocks on the Ho Chi Minh metropolis stock exchange in Vietnam (Phoenix swell, 2017). This index can overcome the weaknesses of VN-Index in the following mannersCapitalization values of constituent stocks are found on the number of shares freely traded on the market (free-float)Restrict the immoderate influence of a particular stock by setting the capitalization weighed limit of 10%Among more than 300 stocks listed on HOSE categorized into 11 primary industries, stocks in VN30 field goal are present in 9 industries. Moreover, stocks in the VN30 ring represent about 80% of HOSE market capitalization and 60% of HOSE market volume (Dao, 2014).From the advantages above, it can be concluded that VN30 Index can represent the Ho Chi Minh market in terms of industries, market capitalization and liquidity. This makes VN30 Index a quite useful investment instrument for index funds.PART 3 RESEARCH METHODOLOGY3.1 Data CollectionThis research paper employs the denary method to investigate the weak form of Efficient Market Hypothesis in the context of Vietnamese background. The study is based on inessential data, which are daily closing prices of stocks included in the VN30 basket. The data are collected from the database of Bao Viet Securities Company a well-known securities firm in Vietnam.It is illustrious that the VN30 basket is periodically reviewed and adjusted every six months on January and July (Dao, 2014). Since the introduction of VN30 Index in February 2012, the basket has been reviewed and adjusted totally 10 judgment of convictions. For the conclude of this study, not all 30 stocks in the basket are elect for analysis. Specifically, the stocks selected must meet the criterion of being consecutively included in the basket for the past five years. Put it another way, if stock A is included in the basket for one period precisely excluded for the contiguous period, stock A will not be considered as the bearing of this study. This ensures the continuity of the data and fair treatment for all stocks in the basket. later all, only 16 stocks meet the criterion (see Appendix A for the practiced list of stocks selected). Thei r closing prices are then collected for the examined period from 06th February 2012 (the first day of VN30 basket) until 20th January 2017 (the end of the latest reviewed period).3.2 Method of AnalysisThe data collected are analysed using IBM SPSS Statistics software version 20. Particularly, three tests are conducted to determine whether stocks selected are at weak-form efficiency, namely runs test, autocorrelation test and Ljung-Box Q statistic. The runs test is a non-parametric test that is designed to find out whether successive price changes are independent. The test is based on the premise that if a series of a data is random, the observed number of runs in the series should be close to the expected number of runs. In this context, the runs test at 5% implication level is used to test the following dead reckoningH1 Stocks in the VN30 basket follows random walkMeanwhile, autocorrelation (or serial correlation) test measures the correlation coefficient between the stock return at current period and its value in the previous period, whether the correlation coefficients are importantly different from cipher. In addition, the Ljung-Box Q (LBQ) statistic examines the reciprocal hypothesis that all autocorrelations are simultaneously equal to zero (that is, the data values are random and independent up to a certain number of lags). In this context, the autocorrelation test and Ljung-Box Q statistic (at 5% level of entailment) are employed to test the following hypothesisH2 There is no correlation between stock prices of today and previous daysIn short, the combination of tests mentioned above fiscal aid determine whether 16 selected stocks in the VN30 basket follows weak-form efficiency or not.PART 4 ANALYSIS AND PRESENTATION OF FINDINGS4.1 Results of Runs testTable 1 shows the results of the runs test based on daily closing stock prices of 16 chosen stocks.Table 1 Results of Runs testSTBVICSSIMSNFPTHAGKDCDPMVNMREEVCBTest treasurea17.2755.7621.5387.1445. 8319.2340.9733.45113.5523.1434.03Cases 461605651648560425601759547484698Cases = Test Value727583537540628763587429641704490Total Cases11881188118811881188118811881188118811881188Number of Runs38204118538717121010Z-32.222-33.379-32.139-33.487-31.453-34.042-34.134-33.478-33.840-33.942-33.944Asymp. Sig. (2-tailed).000.000.000.000.000.000.000.000.000.000.000Runs TestBVHHPGPVDCIIGMDTest Valuea47.3135.3148.1122.3329.84Cases 637660723627594Cases = Test Value551528465561594Total Cases11881188118811881188Number of Runs39893443Z-32.265-34.071-33.996-32.560-32.044Asymp. Sig. (2-tailed).000.000.000.000.000a. Mean pedigree IBM SPSSs result, 2017As can be seen from the above table, the actual number of runs is significantly less than the expected number of runs (total cases), which is evidenced by negative Z-values for all chosen stocks. Furthermore, it is observed that the significant values around the mean of all stocks are 0.000 which is below 0.05 (5% level of significance). This indicates th at 16 selected stocks do not follow random walk behaviour, resulting in the rejection of the inconstant hypothesis H1 which says stocks in the VN30 basket follows random walk.4.2 Results of Autocorrelation testThe results obtained from autocorrelation test and Ljung-Box Q statistic of 16 chosen stocks are presented in Table 2.Table 2 Results of Autocorrelation test and Ljung-Box Q statisticSource IBM SPSSs result, 2017As can be observed from Table 2, significant positive autocorrelation ( 0.8) is detected at all 16 lags for all chosen stocks. It is noted that positive autocorrelation suggests predictability of stock prices in the short term, which provides confirmatory evidence that goes against market efficiency (Bykalvarci Abdioglu, 2011).Moreover, evidence from Ljung-Box Q statistic seems to suggest dependence between current stock price and prices of previous periods. It is noticeable that p-values are all equal to zero for all lags on all 16 stocks. Therefore, the Q statistic fail to support the joint null hypothesis that all autocorrelation coefficients from lag 1 to 16 are equal to zero for the observed stocks. Put it another way, the null hypothesis H2 of absence of autocorrelation is strongly rejected for all lags at 5% significance level.4.3 Interpretation of findingsOn the basis of empirical results obtained from runs test, autocorrelation test and Ljung-Box Q statistic, both null hypotheses H1 and H2 are rejected. In other words, it can be concluded that 16 chosen stocks in the VN30 basket show no characteristics of weak-form efficiency. The findings of the current study are consistent with those of Truong et al. (2010), Vo Le (2013) and Do et al. (2014) who found that Vietnamese stock market is inefficient in the weak form. In general, the results of this study fight slew the Efficient Market Hypothesis (Fama, 1970) and Random Walk Theory (Bachelier, 1900).As noted in the lit review, empirical studies on the weak form of Efficient Market Hypo thesis in emerging markets have been good examined in recent years, as in cases of capital markets in India, Thailand, Indonesia, Pakistan and Nigeria. Although these studies spawn mixed results, most of which suggest that Random Walk characteristic is not a good description of these markets. This study, by investigating a case study in Vietnam, further supports the idea of weak form inefficiency in emerging markets.The rejection of market efficiency in Vietnam have been proven by a number of studies. It seems possible that this inefficiency is due to gaps in Vietnamese fiscal system. Non-transparency in the disclosure of information, crowding effect and speculation are everyday phenomena in Vietnam stock exchanges thus, stock prices somehow do not reflect companies intrinsic values. These gaps are signals of an underdeveloped financial system (Fry, 1994 Leung, 2009) where asymmetric information, clean-living hazard and adverse filling are likely to be found (Islam, et al., 2005 ). As a result, investors are vulnerable to losing a substantial amount of money of money. Additionally, as Vietnam currently does not have a derivatives market, the investment risk can be more severe for investors.Since weak-form efficiency is not witnessed in this study, one implication of the result is that historical data and patterns may be used to make prediction about future stock prices. In other words, technical analysis might be employed by investors when making investment decisions to help them earn abnormal returns. Furthermore, as this study is based on daily data only, further research can test the Efficient Market Hypothesis by taking into account weekly, fortnightly, monthly, quarterly or yearly data on a hourlong time horizon. Alternatively, future research studies may investigate the hypothesis in certain industries or different indices in Vietnam.4.4 LimitationsDue to the nature of the research question, there exists some study limitations which can partially c ontact the results objectivity. First, because of the selection criterion, only 16 out of 30 stocks are chosen for the economic consumption of the study. Therefore, it is difficult to generalise the findings to the on the whole VN30 basket since its establishment. Second, precision of data is shady since some data of closing stock prices are missing in some trading days. As a result, this somehow impacts the accuracy of statistical tests as well as their implications.PART 5 REFLECTION ON THE RESEARCH PROCESSAt the beginning of the research process, we realized that portfolio management is a massive region in finance therefore, narrowing down this topic was critical to our convocation as it would affect how we could construct several(prenominal) topics and research questions. However, the familiar topic of each was not in save of others, which caused conflicts in our discussions. Hence, it was important that we be aware of these conflicts and arrive at a reasonable compromise that is beneficial to the whole free radical (Hede, 2007 Wu et al., 2013). Eventually, since I had preceding finds of investing in the stock market for three years and had written a dissertation about technical analysis, I received the assurance from my fellows when I proposed the topic related to Efficient Market Hypothesis (EMH). On the one hand, I felt happy to have helped my group determine out the appropriate topic. On the other hand, I was a elflike bit worried as my group members had little exposure to financial markets. In fact, I acknowledged that having to work on an unfamiliar area could lower their motivation for the research (Boneva, 2008).When it came to work allocation, some serious issues arose as there was no leader in our group. Because most of the workloads were set by oral agreements without any meeting minutes, everyone was usually vague about their responsibilities. Furthermore, our discussions did not work very well because most of them took place throu gh WhatsApp group rather than face-to-face meetings, leading to frequent distractions from social networks. I bump these problems were really time-consuming and slowed down our groupwork performance. If I had been engaged in a similar project again, I would have nominated myself as the group leader so that I could assign workloads clearly and equally for everyone. I would have also suggested face-to-face meetings in order to have read conversations with members. This should have brought more efficiency to the group in terms of time and contributions.Another issue that obstructed our groupwork productivity was bad time management of my team members. We all had two deadlines for two reports on the same date, but while I devised plans to finish both of which with up to(predicate) efforts, my partners fell into the trap of procrastination. Being rushed for two assignments at the same time was in spades not a good idea as it would negatively affect the performances of both (Peper, et al., 2014). To avoid this situation, we should have drawn up a timeline for the whole group so that everyone could effectively devote their time to each assignment.With regards to literature search and data collection phase, some members in the group seemed to be passive in finding articles and sharing ideas to their peers. They neither knew how to write an adequate literature review nor kinds of online sources they could employ. I feel this was partly due to their lose of background in finance and partly because they had never conducted any positive research studies before. Although this annoyed the rest of group members, we understood that this sometimes could be unavoidable in a multicultural group. We tried to give them as many related articles as possible and instructed them about skim and say technique in order to pick essential readings. In fact, we should have reported the issue to the tutor from the beginning of the research so that those fall behind could receive addit ional trainings in research skills.In summary, this experience has taught me valuable lessons that are quite useful for me in future career, including how to pass and collaborate with members in a multinational group, as well as things to do to become a good leader. I have also learnt more about how to improve time management skills, and how to resolve conflicts occurring during group works. Finally, I think I should speak my mind more much in the future if it is for the sake of the whole group.References Agbam, A. S., 2015. Tests of Random Walk and Efficient Market Hypothesis in Developing Economies Evidence from Nigerian Capital Market. International diary of Management Sciences, 5(1), pp. 1-53.Andrianto, Y. Mirza , A. R., 2016. A Testing of Efficient Markets Hypothesis in Indonesia Stock Market. Procedia Social and Behavioral Sciences, Volume 219, p. 99-103.Bachelier, L., 1900. Louis Bacheliers Theory of Speculation. 1st ed. Princeton Princeton University Press.Boneva, D. L., 2008. Effects of Work Ethic and Social Identification on pauperization in Groups. Illinois ProQuest.Bykalvarci, A. Abdioglu, H., 2011. Testing the weak form efficiency of the Turkish stock market. African Journal of contrast Management, 5(34), pp. 13044-13056.Dao, T. B., 2014. VN30 Index An Overview and Default Probability Analysis. Social Science Research Network (SSRN).Do, T. T. N., Le, T. B. Nguyen, T. T., 2014. Stock market efficiency in emerging markets Evidence from Vietnamese stock market. s.l., s.n.Fama, E., 1970. Efficient Capital Markets A Review of Theory and Empirical Work. Journal of Finance, 25(2), pp. 383-417.Fry, M., 1994. Money, Interest, and trusting in Economic Development. 2nd ed. Baltimore The Johns Hopkins University Press.Haroon, M. A., 2012. Testing the Weak Form capability of Karachi Stock Exchange. Pakistan Journal of Commerce and Social Sciences, 6(2), pp. 297-307.Hede, A., 2007. The shadow group Towards an rendering of interpersonal conflict in work groups. Journal of Managerial Psychology, 22(1), pp. 25 39.Investopedia, 2016. Portfolio Management. Online Available at http//www.investopedia.com/terms/p/portfoliomanagement.aspAccessed 15 March 2017.Islam, S., Watanapalachaikul, S. Clark, C., 2005. are Emerging Financial Markets Efficient? Some Evidence from the Models of the Thai Stock Market. Melbourne, Centre for Strategic Economic Studies.Jiang, Z.-Q., Xie, W.-J. Zhou, W.-X., 2014. Testing the weak-form efficiency of the WTI crude oil futures market. Physica A Statistical Mechanics and its Applications, Volume 405, p. 235-244.Leung, S., 2009. Banking and Financial Sector Reforms in Vietnam. Asean Economic Bulletin, 26(1), pp. 44-57.Nwidobie, B. M. Adesina, J. B., 2014. CAPITAL MARKET EFFICIENCY. AN EMPIRICAL TEST OF THE WEAK-FORM IN THE Nigerian CAPITAL MARKET. Journal of Advanced Studies in Finance, 2(10), pp. 164-170.Peper, E., Harvey, R., Lin, I.-M. Duvvuri, P., 2014. change magnitude Productivity, Decrease Pr ocrastination, and Increase Energy. Biofeedback, 42(2), p. 82-87.Phoenix Capital, 2017. VN30 EQUAL WEIGHT TOTAL RETURN INDEX. Online Available at http//www.customindices.spindices.com/indices/custom-indices/vn30-equal-weight-total-return-indexAccessed 18 March 2017.Singh, R., Leepsa, N. M. Kushwaha, N., 2016. Testing the weak form of efficient market hypothesis in carbon efficient stock indices along with their bench mark indices in select countries. Iranian Journal of Management Studies, 9(3), pp. 627-650.Srinivasan, P., 2010. Testing weak-form efficiency of indian stock markets. Asia Pacific Journal of Research in Business Management, 1(2), pp. 134-140.Srivastava, A., 2010. Are Asian Stock Markets Weak-Form Effcient An Evidence from India. Asia-Pacifc Business Review, 6(4), pp. 5-11.Standard and Poors, 2016. roll Adjustment Methodology, s.l. SP Global.Truong, D. L., Lanjouw, G. Lensink, R., 2010. Stock-Market Efficiency in Thin-Trading Markets The Case of the Vietnamese Stock M arket. apply Economics, 42(27), pp. 3519-3532.Vo, X. V. Le, D. B. T., 2013. Empirical Investigation of Efficient Market Hypothesis in Vietnam Stock Market. Social Science Research Network (SSRN).Wu, K. et al., 2013. Supporting group collaboration in Wiki by increasing the awareness of task conflict. Aslib Proceedings innovative Information Perspectives, 65(6), pp. 581 604.Appendix A List of chosen stocks in the VN30 basket based on the selection criterionNo.TICKER club NAMES1STBSai Gon Thuong Tin Commercial junction Stock Bank2VICVingroup Joint Stock Company3SSISai Gon Securities Incorporation4MSNMasan Group Corporation5FPTFPT Corporation6HAGHoang Anh Gia Lai Joint Stock Company7KDCKinh Do Corporation8DPMPetroVietnam plant food Chemicals Corporation9VNMViet Nam Dairy Products Joint Stock Company10REERefrigeration Electrical Engineering Corporation11VCBBank for distant Trade of Vietnam12

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