Return spillover of Vietnam's sectors in response to US uncertainties

Abstract

This paper investigates the impact of US economic policy uncertainty and geopolitical risk on the return spillovers among 24 sectors in Vietnam from April 13, 2017, to April 8, 2022. The VAR-based connectedness approach and quantile techniques are employed in this study. Empirical results from the study reveal that an increase in US economic policy uncertainty significantly impacts return spillovers. However, this impact is only observed during periods of heightened uncertainty in US economic policy. Economic policy uncertainty plays a more prominent role in affecting the spillovers across Vietnamese sectors compared to geopolitical risk. Findings from our analysis also highlight the crucial role of the banking sector as a transmitter of risk in the Vietnamese stock market.