Dependence Detection between Vietnam Stock Market and International Markets Using Non-Parametric Methods

Abstract

This paper used the K-plot and the Chi-plot to investigate the relationship between the Vietnamese stock market and other stock markets in Asia, Europe and the US. The two non-parametric methods are able to show whether or not dependence exists between the Vietnamese stock market and other stock markets, and if the dependence is left tailed, right tailed or both.The results indicate various aspects of the dependence structure between the Vietnamese stock market and other stock markets. In the Asian area, the Vietnamese stock market is found to have both left and right tail dependence with the Hong Kong, Japan, Malaysia, the Philippines, Singapore, Taiwan and Australia stock markets, while showing only left tail dependence with the China, Indonesia, Korea and Thailand stock markets. The Vietnamese stock market also has both left and right tail dependence with the Dow Jones, Nasdaq, NYSE and S&P 500 indices. Interestingly, the result based on the lagged data series indicates that the Vietnamese stock market exhibits both forms of tail dependence with all of the selected European stock markets.