Transaction Costs and Liquidity Co-Movements within and Across Exchanges: Evidence from Vietnam

Abstract

Employing a sample of all domestic stocks listed on the two Vietnamese stock exchanges – Hochiminh Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) over the 2007-2014 period, we find that the transaction costs for HOSE-listed stocks are about half of those for HNX-listed stocks. This difference persists over the sample period, across most industries, and is smaller with size. We also provide evidence of both within and cross-exchange liquidity co-movements in both Vietnamese stock exchanges. However, we do not find that co-movements in liquidity are stronger in HOSE than HNX, and vice versa. Our findings are important to many parties including exchange regulators, and domestic and international investors in Vietnam.