VIETNAM NATIONAL UNIVERSITY UNIVERSITY OF ECONOMICS & BUSINESS FACULTY OF FINANCE AND BANKING GRADUATION THESIS The Impacts of Interest Rate on Stock Market: Lecturer : Le Thi Phuong Thao Name : Hoang Long Student Code : 19050687 Class : QH2019E TCNH CLC 2 Ha Noi, 11/05/202 DECLARATION I hereby declare that the research topic: "The Impacts of Interest Rate on Stock Market: Empirical Evidence from Ho Chi Minh Stock Exchange" is my own work. All results of the research are the outcome of my own efforts in finding data, reading, translating documents, running software, synthesizing, and conducting the research. The theoretical content of the research utilized some reference materials, and I have fully cited the sources in the reference section. I assure that the data and results in my research are truthful, objective, and have not been published in any other work.
If there is any fraudulence, I take full responsibility. Thesis author Hoang Long ACKNOWLEDGMENTS To complete this scientific research project, I would like to express my sincere gratitude to: The University of Economics & Business - Vietnam National University, Hanoi for providing facilities and modern library system with a variety of research materials, high-quality scientific articles, and especially the electronic library system which facilitated our research work in the context of the pandemic. I would also like to extend my heartfelt thanks to the professors and lecturers of UEB in general and the Department of Finance and Banking in particular for their dedicated teaching and equipping us with precious and useful knowledge throughout our study period at the university. It is thanks to that valuable knowledge that we have a good foundation to complete this research project.
Especially, I am extremely grateful to Mrs. Le Thi Phuong Thao, who directly guided me in carrying out my thesis topic during this time. Thanks to her enthusiastic help and guidance, I have gained more knowledge and valuable experience to be able to complete my research project. Due to the limited experience in analysis and knowledge, this research project may have some shortcomings.
I sincerely hope to receive valuable comments from the professors and lecturers to improve my research work. Finally, I would like to wish the professors and lecturers good health, success, and happiness. Ha Noi, May 11, 2023 Thesis author Hoang Long LIST OF CONTENTS DECLARATION 1 ACKNOWLEDGMENTS 2 CHAPTER 1: INTRODUCTION 5 CHAPTER 2: LITERATURE REVIEW AND THEORETICAL FRAMEWORK ABOUT INTEREST RATES AND IMPACT OF INTEREST RATES ON STOCK MARKET 8 2. --s-- te HH nhà gàng pH tre 8 2.
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Description Of Variables .-«---s« rét HH HH HH nàn HH nhưệt 26 3.--- set HH HH HH HH HH HH HH HH HH gà niên 26 CHAP 4: RESEARCH RESULTS 27 canh ro 0 j0. THE IMPACT OF REFINANCE INTEREST RATE ON VN30 INDEX. THE IMPACT OF INTERBANK RATE ON VN30 INDEX. Discussing Research ReSults.essesssssssesssesssessesssssssessseesssesseesseeseessessseesseesuessneesseesseesaseeaeeeseeeseessseeseeaseesee 41 REFERENCES 42 LIST OF TABLES Table 3.«-- «5+ TH HH HH H111.
1kg 31 Table r0 ir)v20-8( 0 11.2: Lag Order Selection CTÏt€TÌ4.3: Cointegration Test ReSuÏ(.4: VECM model estimation results Table 4.5: Granger causality test F@SUÌfS.7: Variance DeCOMPOSItiON uu.8: Lag Order Selection Criteria 2.---cs-creerrrrrrrrrrrirtrrirrrrirrrrirrrrrirrrrrrrrirrrrierrrke 40 Table 4.10: VECM model estimation results 2.11: Granger causality test reSUlts 2.12: Residual Test ReSult 2 oc eeesssssssssssesssstecsessseenssssesssasssnseateensensesteeseeateeseeasesseeateseeasensees 44 Table 4.1: Granger causality test SUMIMATY .secsssecssesecsseseecssessesseessesseeseeseeseeseeaseateeseeseesseestessees 48 CHAPTER 1: INTRODUCTION 1. The Rationale Of The Research Vietnam's stock market has been established and developed for 21 years, though its age is still young compared to other international stock markets, Vietnam's stock market has attracted many domestic and foreign investors and has set many records in 2021. Vn-Index reached a record high when reaching 1,500.81 point on November 25 (an increase of nearly 36% compared to the end of the year 2020). Over the past 11 years, this is the second-best increase after 2017 (up almost 48%).
Notably, HNX-Index increased by 133.35% - the best increase in Asia. These results have put Vietnam's stock market in the group of 7 markets with the highest growth in 2021 with 35. According to the State Securities Commission, by the end of November 2021, the market capitalization of Vietnam's stock market has reached VND 9.19 million billion, equaling 147.97% of GDP, up 37. Besides, according to data from the Vietnam Securities Depository (VSD), since the beginning of 2022, the market has added nearly 2.4 million new securities trading accounts.
These are all very encouraging numbers.vn statistics) Up to now, about 7% of Vietnam's population invest on securities. However, the stock market is always full of risks and can cause great reduction on assets’ value without a reasonable investment strategy. Typically, at the end of 2022, from the historical peak of VNIndex, the index fell to the area of 873 points and ended 2022 at 1,007 points - equivalent to a loss of 32.78% - the second largest decrease in the history of the market, cut off 3 years of consecutive growth of the index. There is a need to find the influencing factors to explain the fluctuations of the stock market.
Because through that, investors have more bases to make more accurate investment decisions and reduce risks. Among the influencing factors, macro factors including interest rates set by the central bank to stabilize or adjust the inflation level, control the economic growth rate etc., are important causes of fluctuations occurring in the stock prices. The research: “The Impacts of Interest Rate on Stock Market: Empirical Evidence from Ho Chi Minh Stock Exchange” will study the relationship between interest rates and the stock market in order to achieve that objective.1 Overall Objective Find out the relationship and interaction between interest rates and the VN30, from which to draw relevant conclusions and some recommendations for investors.2 Detailed Objectives - Present relevant theories models - Review the literature - Study the interaction between interest rate and VN30. - Draw conclusions based on the results obtained, propose some recommendations for investment purposes.
Scope Of the Research Scope of content The thesis focuses on studying the historical data series of interest rates and VN30, thereby proposing recommendations for investment purposes. Spatial scope The study was conducted in Vietnam's stock market Time range Secondary data information was collected during the period from January 2012 to December 12, 2022. Research Question Corresponding to the research objectives set out above, the thesis determines the need to answer the following research questions: - What is the correlation between interest rates and the VN30? - Some recommendations for the state and investors? 5. Research Methodologys The research was carried out through two main methods: qualitative research and quantitative research.1 Qualitative Research Based on previous studies and related theories, the author uses qualitative research methods to refer to documents to have a more multi-dimensional perspective.2 Quantitative Research Throuph the collected past data, process and apply the data to the VECM model to find out the correlation between the two variables mentioned above.
Contributions Of The Study The research contributes to the literature by providing understanding on the impact of interest rates on VN30 using VECM model. Structure Of The Research In addition to the "Introduction" and "Conclusion", the thesis consists of 3 chapters including the following contents. Chapter 2 provides an overview of research on the impact of interest rates on the VN30 stock index. Chapter 3 describes the characteristics of the variables as well as the models and data that will be used for the topic.
Chapter 4 summarizes the results obtained after running the data and testing the quality of the model. Conclusions and recommendations will be presented on Chapter 5. CHAPTER 2: LITERATURE REVIEW AND THEORETICAL FRAMEWORK ABOUT INTEREST RATES AND IMPACT OF INTEREST RATES ON STOCK MARKET 2. Factors that affect the stock market The factors affecting the stock market include economic factors such as GDP growth, inflation, interest rates, consumer price index, oil prices, Political events such as elections, policy changes, and geopolitical tensions etc.
can also impact the stock market. So, if there are many people who want to buy a commodity and demand becomes greater than supply, the price tends to increase and vice versa. The same goes for stocks, if a stock is sought after by many investors, its price tends to increase. The factors mentioned above affecting investor sentiment, thereby affecting the decision to buy and sell securities or in other words make the supply and demand for stocks change, leading to an increase/decrease in the index.
In this study, author will delve deeper into the impact of interest rate on stock market index. Overview of interest rate 2. Definition Interest rate in general is the amount of money that an individual or organization must pay to the lender, or receive from a bank or financial institution when borrowing money. The interest rate is calculated based on the percentage of the amount borrowed or lent and the principal For example, if you borrow 100 million VND and have to repay an interest of 15 million VND after one year, interest rate will be 15% per year.
Interest rates can also be calculated for short-term loans, such as credit cards or other short-term loans. Classification And Functions Of Interest Rate Interest rates are a fundamental aspect of the financial system and play a vital role in the economy. They are the cost of borrowing money and the compensation for lending money. Interest rates affect every aspect of the economy, including consumption, investment, and inflation.
Understanding the different types of interest rates and their functions is crucial for making informed financial decisions. Based on different criteria, interest rates can be classified as follows:. Based on the nature of the loan: Basic interest rate: used as a basis for determining interest rates for credit services. Bank deposit interest rate: the interest rate that banks pay to customers who deposit money with them.
Loan interest rate or credit interest rate: the interest rate that borrowers pay to banks when they borrow money. Depending on the form of the loan (secured loans, unsecured loans, installment loans, etc.), the interest rate will vary. Bank discount rate: applied when an individual applies for a loan in the form of commercial paper or other valuable documents, calculated as a percentage based on the face value of the commercial paper and deducted when the customer receives the loan amount. Refinance interest rate: The central bank applies this rate to commercial banks when they lend money in the form of short-term commercial paper or valuable documents that have not yet reached maturity.
Interbank rate: This is the interest rate set by the central bank based on the proportion of capital utilization and the development of the market, and is used to determine the interest rate between banks. Based on the real value determined by the value of the loan: Nominal interest rate: This is the interest rate calculated based on the nominal value, excluding the impact of inflation (Nominal interest rate = Real interest rate + Inflation rate). Real interest rate: The interest rate adjusted based on the nominal interest rate and the inflation rate. Based on the flexibility of the interest rate: Fixed interest rate: The interest rate will not change throughout the loan or savings contract period.
This interest rate is determined in the loan or savings contract and does not change when the market fluctuates. Floating interest rate: The interest rate can increase or decrease depending on the market interest rate during the credit period. Borrowers benefit from a decrease in the interest rate, but are exposed to risks if all banks increase the interest rate. Based on the currency of the loan: Domestic interest rate: applies to deposits and loans in VND.