Connectedness of Vietnamese bank stock returns under the impact of the COVID-19 pandemic
The COVID-19 pandemic highlighted the sensitivity of connectedness among bank stock returns in Vietnam. The aim of this study is to examine the strength of this connectedness along with the effect of government lockdown policy and COVID-19 cases on the total connectedness index (TCI) of 16 listed ba...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2023-11-01
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| Series: | Banks and Bank Systems |
| Subjects: | |
| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19206/BBS_2023_04_Ha.pdf |
| _version_ | 1797449198027669504 |
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| author | Nguyen Phu Ha Luong Tram Anh Le Hong Thai |
| author_facet | Nguyen Phu Ha Luong Tram Anh Le Hong Thai |
| author_sort | Nguyen Phu Ha |
| collection | DOAJ |
| description | The COVID-19 pandemic highlighted the sensitivity of connectedness among bank stock returns in Vietnam. The aim of this study is to examine the strength of this connectedness along with the effect of government lockdown policy and COVID-19 cases on the total connectedness index (TCI) of 16 listed banks on Vietnamese stock exchanges. They are assessed using the database of FiinPro on the banking sector between January 2020 and July 2022, Vietnam Center for Disease Control and Prevention (CDC), and The World Health Organization (WHO) on the COVID-19 pandemic, employing a time-varying-parameter vector autoregressive (TVP-VAR) connectedness framework and the conditional quantile regression model. The results show that at the firm level, there is strong interdependence among bank stock returns with the average TCI being as high as 90.66%. It is also revealed that medium and large-sized banks are receivers of shock, while smaller banks are transmitters. As far as the impact on TCI is concerned, the widespread of the pandemic with the increasing number of COVID-19 cases is significantly negative, whereas the tightening of lockdown is significantly positive. Besides, the degree of the impact varies according to the 95th, 75th, 50th and 25th levels of conditional quantile regression. Based on the study’s findings, individual investors are recommended to thoroughly analyze the connectedness of banks before making investment decisions, while bank regulators should strengthen controls on credit relationships with small banks. Regarding policy makers, it is proposed to apply flexible restrictions and short-term lockdown depending on the actual outbreak of the pandemic.
AcknowledgmentThe paper was conducted within the scope of Project QG21.48 of Vietnam National University. |
| first_indexed | 2024-03-09T14:21:23Z |
| format | Article |
| id | doaj.art-38877136588c449ba8c4bc2c2543d720 |
| institution | Directory Open Access Journal |
| issn | 1816-7403 1991-7074 |
| language | English |
| last_indexed | 2024-03-09T14:21:23Z |
| publishDate | 2023-11-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Banks and Bank Systems |
| spelling | doaj.art-38877136588c449ba8c4bc2c2543d7202023-11-28T10:46:40ZengLLC "CPC "Business Perspectives"Banks and Bank Systems1816-74031991-70742023-11-0118420922510.21511/bbs.18(4).2023.1819206Connectedness of Vietnamese bank stock returns under the impact of the COVID-19 pandemicNguyen Phu Ha0https://orcid.org/0000-0003-0211-6229Luong Tram Anh1https://orcid.org/0000-0002-1278-8670Le Hong Thai2https://orcid.org/0000-0003-0255-7761Ph.D., Former Department Chair, Faculty of Finance and Banking, Banking Department, University of Economics and Business, Vietnam National UniversityPh.D., Lecturer, Faculty of Banking and Finance, Department of Corporate Finance, University of Economics and Business, Vietnam National UniversityPh.D., Lecturer, Vice Head of Public Finance Department, Faculty of Banking and Finance, Department of Public Finance, University of Economics and Business, Vietnam National UniversityThe COVID-19 pandemic highlighted the sensitivity of connectedness among bank stock returns in Vietnam. The aim of this study is to examine the strength of this connectedness along with the effect of government lockdown policy and COVID-19 cases on the total connectedness index (TCI) of 16 listed banks on Vietnamese stock exchanges. They are assessed using the database of FiinPro on the banking sector between January 2020 and July 2022, Vietnam Center for Disease Control and Prevention (CDC), and The World Health Organization (WHO) on the COVID-19 pandemic, employing a time-varying-parameter vector autoregressive (TVP-VAR) connectedness framework and the conditional quantile regression model. The results show that at the firm level, there is strong interdependence among bank stock returns with the average TCI being as high as 90.66%. It is also revealed that medium and large-sized banks are receivers of shock, while smaller banks are transmitters. As far as the impact on TCI is concerned, the widespread of the pandemic with the increasing number of COVID-19 cases is significantly negative, whereas the tightening of lockdown is significantly positive. Besides, the degree of the impact varies according to the 95th, 75th, 50th and 25th levels of conditional quantile regression. Based on the study’s findings, individual investors are recommended to thoroughly analyze the connectedness of banks before making investment decisions, while bank regulators should strengthen controls on credit relationships with small banks. Regarding policy makers, it is proposed to apply flexible restrictions and short-term lockdown depending on the actual outbreak of the pandemic. AcknowledgmentThe paper was conducted within the scope of Project QG21.48 of Vietnam National University.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19206/BBS_2023_04_Ha.pdfbanksconnectednessCOVID-19 pandemicstock returnsTVP-VAR |
| spellingShingle | Nguyen Phu Ha Luong Tram Anh Le Hong Thai Connectedness of Vietnamese bank stock returns under the impact of the COVID-19 pandemic Banks and Bank Systems banks connectedness COVID-19 pandemic stock returns TVP-VAR |
| title | Connectedness of Vietnamese bank stock returns under the impact of the COVID-19 pandemic |
| title_full | Connectedness of Vietnamese bank stock returns under the impact of the COVID-19 pandemic |
| title_fullStr | Connectedness of Vietnamese bank stock returns under the impact of the COVID-19 pandemic |
| title_full_unstemmed | Connectedness of Vietnamese bank stock returns under the impact of the COVID-19 pandemic |
| title_short | Connectedness of Vietnamese bank stock returns under the impact of the COVID-19 pandemic |
| title_sort | connectedness of vietnamese bank stock returns under the impact of the covid 19 pandemic |
| topic | banks connectedness COVID-19 pandemic stock returns TVP-VAR |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19206/BBS_2023_04_Ha.pdf |
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