SEASONALITY IN THE VIETNAM STOCK INDEX
H. Swint Friday, Ph.D. and Nhung Hoang
Texas A&M University – Corpus Christi, TX, USA
International Conference of Management,
Economics, and Social Sciences
Bangkok, Thailand – Dec 23-24, 2011
EMERGING MARKET SHARE
VIETNAM INSIGHT
 One of the fastest-growing economies in Asia
 GDP growth rate (1990 – 2010)
ASIAN PACIFIC MARKET P/E’s
(Source: Bloomberg, Data as of Dec 09, 2011)
VIETNAM MARKET PERFORMANCE
Source: VNDirect (Dec 09,2011)
PREVIOUS LITERATURE - JANUARY EFFECT
 Wachetel (1942) first document the January effect in
stock returns
 Keim (1983): abnormal January returns for NYSE
and AMEX common stocks over the period 1963–
1979
 Three proposed explanations:
 Tax-loss hypothesis
 Gamesmanship hypothesis
 Window dressing hypothesis
INTERNATIONAL MARKETS
 January effect: Canada, Japan, Ghana, Taiwan, Malaysia
 Monthly effect: Jamaica, Asian Pacific countries (Australia,
china, HongKong, India, Indonesia, and South Korea)
 January effect NOT observed in Greek, Nigerian,
Zimbabwean, Ukrainian, Kuwait, Amsterdam, Colombo
stock market
PREVIOUS LITERATURE –
HALLOWEEN EFFECT
 “Sell in May and go away until Halloween day”
 Riepe (2003): S&P 500 Index from Jan 1925 to Mar 2003
 Bouman & Jacobsen (2002): Halloween effect observed in Argentina,
Austria, Australia, Belgium, Brazil, Canada, Chile, Denmark, Finland,
France, Germany, Greece, Hong Kong, Indonesia, Ireland, Italy, Japan,
Jordan, Korea, Malaysia, Mexico, Netherlands, Norway, Philippines,
Portugal, Russia, Singapore, South Africa, Spain, Sweden, Switzerland,
Taiwan, Thailand, Turkey, The United Kingdom, and The United States.
 Two explanations:
 Summer vocation
 Changes in fundamental factors
VIETNAM STOCK MARKET
RESEARCH DATA
 Examine the VN-Index in over a 10 year period from its
establishment on July 28th, 2000 to December 31st, 2010.
 Due to the small number of firms traded prior to 2005, the
category mean monthly returns are also calculated from
August 2000 through December 2004 and from January
2005 through December 31st, 2010.
 VN-Index monthly returns are calculated from daily returns
using the following equation:
TABLE I
MEAN MONTHLY RETURNS AND
MEAN MONTHLY TRADING VOLUME
TABLE II
MONTHLY RETURNS FROM 8/2000 – 12/2010
TEST TAX LOSS SELLING HYPOTHESIS
 REGRESSION MODEL
January return = f(prior years return, prior years
standard deviation of returns).
 RESULTS:
TABLE IV : MEAN MONTHLY RETURNS FOR
MONTHS FROM NOVEMBER THROUGH APRIL
TABLE V: MEAN MONTHLY RETURNS FOR
MONTHS FROM MAY THROUGH OCTOBER
TABLE VI: DIFFERENCE IN HOLDING
PERIOD RETURN ANALYSIS
TABLE VII: COMPARISON OF THE AVERAGE
MONTHLY RAINFALL AND AVERGAGE MEAN
MONTHLY RETURNS
CONSLUSIONS
 This result provides support for the January Effect in the
Vietnam Stock Index.
 Evidence against tax-loss selling hypothesis.
 Halloween effect was present in Vietnam market.
 April is a good month to exit the market
 The authors posit rainy season (May – Oct) as a
Halloween effect explanation in Asian markets.