Which Global Stock Indices Trigger Stronger Contagion Risk in the Vietnamese Stock Market? Evidence Using a Bivariate Analysis

  • Kuan-Min Wang Overseas Chinese University, Department of Finance, Taiwan
  • Hung-Cheng Lai Overseas Chinese University, Department of Finance, Taiwan

Abstract

This paper extends recent investigations into risk contagion effects on stock markets to the Vietnamese stock market. Daily data spanning October 9, 2006 to May 3, 2012 are sourced to empirically validate the contagion effects between stock markets in Vietnam, and China, Japan, Singapore, and the US. To facilitate the validation of contagion effects with market-related coefficients, this paper constructs a bivariate EGARCH model of dynamic conditional correlation coefficients. Using the correlation contagion test and Dungey et al.’s (2005) contagion test, we find contagion effects between the Vietnamese and four other stock markets, namely Japan, Singapore, China, and the US. Second, we show that the Japanese stock market causes stronger contagion risk in the Vietnamese stock market compared to the stock markets of China, Singapore, and the US. Finally, we show that the Chinese and US stock markets cause weaker contagion effects in the Vietnamese stock market because of stronger interdependence effects between the former two markets.


Key words: Vietnamese stock market, Contagion risk, EGARCH model, DCC estimation, Sub-prime mortgage crisis.
JEL: C12, C22, F30.

How to Cite
Wang K., & Lai H. (2013). Which Global Stock Indices Trigger Stronger Contagion Risk in the Vietnamese Stock Market? Evidence Using a Bivariate Analysis. Panoeconomicus, 60(4), 473-497. doi:10.2298/PAN1304473W
Section
Original scientific paper