Abstract
The introduction of the first tradable stock index futures of VN 30 is a very good signal showing that Vietnam is starting to have a high-level financial market, which brings many expectations about sustainable and safe development of its stock market. However, risk concerns of this type of derivative products have been raising with many claims since then. This article aims to provide empirical evidences to show if futures trading plays important role of price discovery and information transmission for spot market. Using daily data collected about VN 30 Index Futures, VN 30 Index, VN Index from August 10, 2017 to February 28, 2019, which is divided into three sub-periods (increase/decrease/recovery), the research verifies VN 30 Index Futures’ role of price discovery and information transmission by applying Vector Error Correction Model (VECM). Empirical findings show that there is a stable equilibrium relationship between the two series groups (including VN 30 Index Futures, VN 30 Index and VN 30 Index Futures and VN Index) during three sub-periods or spot and futures markets are integrated and synchronized. In particular, VN 30 Index Futures’ price discovery and information transmission are clearly seen when the market falls or does not change a lot.
Highlights
In August 2017, Vietnam’s derivatives market officially operated with the first tradable index futures of VN 30
According to the data reported by Ho Chi Minh Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX), in 2018, this first product of derivative witnessed 19,697,764 negotiated contracts
The study tests each series for stationarity of VN 30 Index Futures and VN 30 Index, as well Thirdly, the research tries to find out if the two seas VN Index by applying the unit root test to the ries (VN 30 Index Futures and VN 30 Index, as residuals from this regression called Augmented well as VN 30 Index Futures and VN Index) are Dickey-Fuller Test
Summary
In August 2017, Vietnam’s derivatives market officially operated with the first tradable index futures of VN 30. This event marked Vietnam as the 42nd country in the world and the 5th country in ASEAN (after Singapore, Malaysia, Indonesia, and Thailand) having this high-level financial market. VN 30 Index Futures is expected to limit the risks, and diversify the investment products, increase the liquidity and scale of the stock market, as well as help the stock market to grow stably and safe, thereby increase its attractiveness to the investors. After more than a year of introduction in Vietnam’s stock market, VN 30 Index Futures has experienced impressive achievements.
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