STATE BANK OF VIETNAM BANKING ACADEMY FOREIGN LANGUAGE FACULTY ---------- GRADUATION THESIS APPLYING EFFICIENCY MARKET THEORY IN VIETNAM SECURITIES MARKET STUDENT : NGUYEN QUOC TUAN LECTURER : Dr. TRAN THI XUAN ANH (MRS) CLASS : K15ATCC COURSE : 2012-2016 HA NOI - 2016 i DECLARATION I declare that I am the sole author of this thesis and neither any part of this thesis nor the whole of this thesis has been submitted to any other University or Institution. To the best of my knowledge, I certify that all the information and working material of other people are fully acknowledge in accordance with the standard referencing practices. ii ACKNOWLEDGEMENT Thanks to the kind support and help of many individuals, I am able to complete my thesis. I would like to express my gratitude to all of them. To my supervisor, Dr. Tran Thi Xuan Anh, who has a plenty of patience on me. You are the one raising my interest in securities market and guiding me to finish this thesis. I am so grateful for your support. To my dear friend, Nguyen Thuy Duong, who has given me uncountable encouragements and spent time with me. Nguyen Thi Hong Mai, Dean of Foreign Languages Faculty for being extremely generous to me. To all my lecturer, without them, I cannot be who I am at this moment. Thank you, Banking Academy, for being so kind to me! iii ABSTRACT In an efficient market, information is as plentiful and inexpensive, and the market is expected to immediately absorb any information released to the public. This paper examined the effect of earnings, dividend and changing structure announcements by analyzing changes in share prices for the period between 1st January 2014 and 20th April 2016. The study population was all the listed banks in Vietnam stock market and 8 banks were selected for the study. Abnormal returns during an event window of 21 days were determined using the event study methodology by employing the market model on data collected about selected firms. Inferential and descriptive statistics were used to test for significant effect of earnings announcement on share prices. The results obtained indicate that the abnormal returns around the earnings announcement were not significant at a 5 % margin of error and the insignificant cumulative average abnormal returns surrounding the event date are inconsistent with EMH. This suggests that the Vietnam securities market does not efficiently adjust to earnings information. It is concluded that these announcements depicted no major effect on share prices of companies at the time of the announcement as well as immediately after the announcements. iv TABLE OF CONTENTS DECLARATION . iii TABLE OF CONTENTS . iv LIST OF TABLES AND FIGURES . vi LIST OF ABBREVIATIONS . vii CHAPTER I: INTRODUCTION .1, Rationale to the research .2, Objectives of the study .3, Scope of the study .4, Methodology of the study .5, Significance of the study .6, Structure of the thesis .2 CHAPTER II: LITERATURE REVIEW .1, General view of EMH .1, Definition of an efficient market .2, Conditions of an efficient market .3, Levels of EMH .2, Data types and data collection .10 CHAPTER III: DATA ANALYSIS .1, Socio-demographic Data Presentation .3, Data Analysis and Discussion of Findings .1, Companies Alpha and Beta Values.2, Descriptive Analysis of the Average Abnormal Return (AAR) .3, Behavior of Abnormal Returns on and around Announcement Day .4, Summary of findings .17 Chapter IV: Recommendations and conclusions.1, Expanding the securities market .2, Improving investors’ skills .3, Enhancing liquidity of VSM .4, Maintaining macroeconomic stability .5, Building a strong and effective information system .3, Limitation and proposal for further study .23 vi LIST OF TABLES AND FIGURES Table 1: Socio-demographic details of selected banks .11 Table 2: Table showing the statistical measure of AAR .13 Table 3: Table showing the AAR and CAAR around earnings announcement date .14 Table 4: Result of the t-test .16 Figure 1: Graphic representation of AAR for the 21-day event window .15 Figure 2: Graphic representation of CAAR for the 21-day event window .16 Figure 3: Scale of securities markets in several countries in 2015 .18 vii LIST OF ABBREVIATIONS Vietnam Stock market - VSM Efficient Market Hypothesis – EMH Average Abnormal Return – AAR Cumulative Average Abnormal Return - CAAR 1 CHAPTER I: INTRODUCTION 1.1, Rationale to the research A developing economy is always associated with the development of capital markets in which the securities market plays an importance role. As the biggest and the fastest channel to raising capital, securities market encourages the growth of capital markets. This is proved in many advance economies, for example in the U. In the securities market, while listed companies’ target is maximizing the value of their companies, the investors are aiming to get the highest profit from invested securities. Therefore, both parties share the same interest in price of these securities. Meanwhile, these values are able to go up and down depends on good or bad information. In other ways, information is a vital factor in the securities market. Only when the information is reflected fast and honestly in securities’ price and interest, this securities market is considered as an efficient market in terms of information.Fama has proposed the Efficient Market Hypothesis (EMH) to test the efficiency of stock markets. EMH has become a mutual concern of participants in securities market and economists. After a number of studies, EMH still is a controversial topic due to the question “Are there any efficient markets?” In case of Viet Nam, VSM is newly formed and has plenty of difficulties in comparison with other securities markets in area, especially in announcing information. According to the economists, a fresh securities market as VSM normally is not efficient which has been proved in studies. However, there is evidence of which even if the market is not efficient itself, some stocks have a well respond to new information. Due to above reasons, it has been decided to research the effects of information on securities’ price by applying EMH in VSM.2, Objectives of the study Firstly, the thesis provides a general view of EMH and research methodology. Secondly, it takes a deep look into how prices of securities perform related to 2 announcing news. Finally, the last part of this thesis is my opinions to improve the prices’ performance.3, Scope of the study Like every study, there are some limitations in the thesis. It is only aimed at responses of listed banking securities to information in the period between 1st January 2014 and 20th April 2016.4, Methodology of the study In order to achieve the thesis’s objectives, the following hypotheses were formulated. H0: New information does not affect securities prices. In other words, the VSM does not react efficiently to new information. H1: New information does affect securities prices. As, the VSM does react efficiently to new information. Besides, the study also used the case of event studies (Brown & Warner 1985) as a base method with 21-day event window.5, Significance of the study This study should determine the impact of information on banking securities prices in Vietnam, which is the concern of investors, regulators and researchers. The study will become a reference for interested investors to make more profit by showing fresh opportunities.6, Structure of the thesis The main contents of this thesis concluded four main chapters: - Chapter I: Introduction - Chapter II: Literature review - Chapter III: Data analysis - Chapter IV: Recommendations and conclusions. 3 CHAPTER II: LITERATURE REVIEW 2.1, General view of EMH 2.1, Definition of an efficient market According to Fama (1965), an efficient market should be the place where investors aimed either to long-term investment or to maximum profit are trying to predict future value of individual securities with every chances. Due to the competition among these investors, the actual prices of individual securities always reflect fully the effects of information about events that have already occurred or will have occurred as a market’s expectation. In other words, the actual price of a security, in an efficient market, is a performance of its intrinsic value at any point of time.2, Conditions of an efficient market Despite the importance of EMH, it is difficult for a young securities market as Vietnam to meet all the conditions of an efficient market. Firstly, the most important requirement is the scale of securities market. It is needed to have enough number of investors who compete to each other to get higher profit. These investors have a random and individual work. There is no bias among investors. Secondly, it is vital that information is automatically announced by chance. The time announcements are independent to others and investors have to pay an equal cost to get the information. Thus, investors are incapable of earning an abnormal return based on buying information. Thirdly, all participants should have an equal range of knowledge. In other words, they know the same method and analysis skill to study a security. For that reason, new information leads them to only judgment then the share value will adjust instantly. The key point of this situation is the random appearance of new information so the future price is still unknown. Finally, risk and return trade-off plays a significant role in efficient market. The share price should reflect all available information. Therefore, it is necessary that the calculation of expected return includes both intrinsic value and risk. Investors decide the suitable expected return with reasonable risk. 4 In short, an efficient market had better is a big securities market, in which information announcement is unpredictable, has a huge number of participants with equal skills; there always is a correlation between risk and return.3, Levels of EMH Normally, there are three levels of the EMH: the weak, semi-throng and strong forms. The weak form of EMH states that the price of a security already has reflected all the occurred events or all the information in the past only. It is impossible for investors to predict the share price in response to new information because there is no correlation between future and past value. Without expectation, new information appears. Therefore, excess return definitely cannot be achieved through the study of past price movements. In semi-strong form of EMH, prices reflect all publicly available information and all past information. After new information is announced, the supply and demand will change instantly. As a result, the price is moved to a new equilibrium value. The semi- strong efficiency of market depends on how fast the price changes due to all publicly available information. If a market is semi-strong efficient, the current market price is the best clue to predict future price because it includes the risk and return of an investment. The strong version of EMH asserts that the price has reflected all information, including hidden information, and the price will adjust immediately to new information. For example, even if the current market price is lower than the value justified by a group having private information, this group will buy the shares to earn profit until the price stabilizes and reaches an equilibrium point. At that time, there is no reason for them to continue buying. As in semi-strong form, the current market price is the best available resources for investors to forecast future price.1, Research design The research was carried out as an event study. Event study methodology is the set of econometric techniques used to measure and interpret the effects of an event on firms’ securities. In 1985, Brown and Warner provide a framework for conducting an event 5 study, and this research adopted that framework for the research. The purpose of the study is to investigate the banking stock price reaction to announcements like earnings, dividend and changing company structure by using 8 listed banks on the VSM the period from 1st January 2014 to 20th April 2016.
Nghiên Cứu Hiệu Quả Thị Trường Chứng Khoán Việt Nam
Nghiên cứu lý thuyết thị trường hiệu quả trong thị trường chứng khoán Việt Nam, phân tích và đánh giá tác động đến đầu tư và phát triển.
Trường đại học
State Bank of Vietnam Banking AcademyChuyên ngành
Foreign LanguageNgười đăng
Ẩn danhThể loại
Graduation ThesisPhí lưu trữ
30 PointMục lục chi tiết
THÔNG TIN CHI TIẾT
Tác giả: Nguyen Quoc Tuan
Người hướng dẫn: Dr. Tran Thi Xuan Anh (Mrs)
Trường học: State Bank of Vietnam Banking Academy
Chuyên ngành: Foreign Language
Đề tài: Applying Efficiency Market Theory In Vietnam Securities Market
Loại tài liệu: Graduation Thesis
Năm xuất bản: 2016
Địa điểm: Ha Noi
Tài liệu "Nghiên Cứu Hiệu Quả Thị Trường Chứng Khoán Việt Nam" cung cấp cái nhìn sâu sắc về tình hình và hiệu quả hoạt động của thị trường chứng khoán tại Việt Nam. Nghiên cứu này không chỉ phân tích các yếu tố ảnh hưởng đến sự phát triển của thị trường mà còn đưa ra những khuyến nghị hữu ích cho các nhà đầu tư và doanh nghiệp. Độc giả sẽ tìm thấy thông tin giá trị về cách thức hoạt động của thị trường, từ đó có thể đưa ra quyết định đầu tư thông minh hơn.
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