Transcript of How Vietnam Stock Returns Response to Events Announcement
- 1. VIETNAM STOCK MARKET: HOW STOCK RETURNS RESPONSE TO EVENT
ANNOUCEMENTS By: Vu Duy Bang Nguyen Thanh Nam Nguyen Quynh Anh Mac
Thi Huong Intake: MEBF6-HCM A Thesis Submitted to CFVG University
Paris Dauphine ESCP-EAP In partial fulfillment of the requirements
for the degree of MASTER IN ECONOMICS OF BANKING AND FINANCE
Hochiminh City, June 2010
- 2. Authorization We hereby declare that we are authors of the
thesis. We authorize CFVG to lend this thesis to other institutions
or individuals for the purpose of scholarly research. We further
authorize CFVG to reproduce the thesis by photocopying or by other
means, in total or in part, at the request of other institutions or
individuals for the purpose of scholarly research.
_________________________ _________________________ Vu Duy Bang
Nguyen Thanh Nam _________________________
_________________________ Mac Thi Huong Nguyen Quynh Anh
- 3. ABSTRACT A Thesis Submitted in Partial Fulfillment of the
Requirements for the Degree of The Master in Economics of Banking
and Finance to CFVG Students Name: Vu Duy Bang Nguyen Thanh Nam
Nguyen Quynh Anh Mac Thi Huong Title: Vietnam Stock Market: How
Stock Returns Response to Event Announcements Date: 25 June 2010
This event study focuses on how Vietnamese stock price return
responses to earning announcement and right issue announcement.
Market model is employed to extract abnormal return during the pre
and post period of the official announcement date. For the total of
231 observations, we found that for positive earning and right
issue, there is meaningful abnormal return accumulated about 20
days before the official announcement date. This shows information
leakage as rumors is common in Vietnam stock market. In contrast,
negative earning event does not exhibit negative abnormal return
during pre period due to short selling is not allowed. Post
abnormal return for positive earnings is also more substantial than
that of negative earnings. For right issue, cash dividend shows
higher abnormal return compared to that of share issue except for
share issue with high ratio.
- 4. This page intentionally left blank
- 5. CONTENTS
INTRODUCTION.....................................................................................................................2
CHAPTER 1:
BACKGROUND................................................................................................3
1. Empirical
theories..........................................................................................................3
2. Models for Measuring Normal Performance (3)
.............................................................5 3.
Market Efficiency in Capital
Market.............................................................................8
4. Vietnam Stock Market
Overview..................................................................................9
CHAPTER 2: STUDY METHODOLOGY AND DATA
PROCESSING..............................16 1. Study
methodology......................................................................................................16
2. Events to be studied in this
paper.................................................................................17
3. The Population and The
Sample..................................................................................18
4. Define and categorize the
events.................................................................................20
5. Sampling interval and time
line...................................................................................22
6. Parameters
computation...............................................................................................23
CHAPTER 3: FINDINGS AND
ANALYSIS.........................................................................28
1. Aggregation of abnormal return over time
CAR.....................................................28 2. CAR
sensitivity by compound
ratios:..........................................................................33
3. Density chart of CAR over PRE
period.......................................................................34
4. Density chart of CAR over POST
period.....................................................................35
5. Density chart of PRE CAR by event
type....................................................................37
6. Density chart of POST CAR by event
type.................................................................39
7. Chart of distribution function of PRE
CAR.................................................................41
8. Chart of distribution function of POST
CAR..............................................................43
CHAPTER 4:
CONCLUSION................................................................................................45
APPENDIX
I...........................................................................................................................46
APPENDIX
II..........................................................................................................................47
APPENDIX
III.........................................................................................................................67
- 6. Vietnam Stock Market: How Stock Returns Response to Event
Announcements 2 INTRODUCTION This paper examines the impact of
selected events on stock prices in Vietnam stock market. Event
studies have been considered as an essential part of empirical
research in finance and other areas. Regarding the relationship
between share prices and information release, there are various
event studies have been taken over years for both well-developed
markets (the UK, the US etc) or emerging markets (India, Malaysia,
China). We realize that there is no pertinent paper available for
now that studies how stock prices react to event announcements in
Vietnam stock market after ten years of operation. With limitation
of data, our aim is to assess and discuss about the impact of some
economical events on stock prices using statistical survey method
as well as with theoretical assumptions in Vietnam market context.
The paper is organized as follows: chapter 1 mentions background of
the study by reviewing literature and Vietnam stock market
overview, chapter 2 states study methodology and data processing,
chapter 3 presents our findings, chapter 4 is conclusion for the
study.
- 7. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock
Returns Response to Event Announcements 3 CHAPTER 1: BACKGROUND 1.
Empirical theories Event studies examined the behavior of stock
prices on corporate events (1) . Many literatures of event studies
was researched over the past several decades and become an
important part of financial economics. In a corporate context, the
usefulness of event studies from the fact that magnitude of
abnormal movement at the time of events provided a measure of the
impact of these events on the wealth of the firm. Event studies are
the most successful uses of econometrics in policy analysis. The
methodology, which studies the movement of stock prices due to
specific events were originally developed to test the hypothesis
that the stock market was efficient-that publicly available
information is impounded immediately into stock prices such that an
investor can not earn abnormal profits by trading on the
information after its release. The event study methodology is
well-accepted and extensively used in finance. Events study results
have been used in several hundreds scholarly articles in leading
(1) We focus on event studies on the mean stock price effects.
Others types of event studies such as return variances (Beaver,
1968 and Patell, 1976), trading volume (Beaver, 1968 and Campbell
and Wesley, 1996), operational performance (Barber and Lyon, 1996)
are not mentioned on this research.
- 8. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock
Returns Response to Event Announcements 4 academic finance journals
to analyze corporate finance issues, such as stock repurchases and
stock split and the relation between stock prices and accounting
information, by examining the impact of earnings release. Event
studies serve the important goal in capital market research as a
way of testing market efficiency. Systematically non-zero abnormal
returns that persist after a particular type of corporate events
are in consistent with market efficiency. Theories concerning to
dividend payout (2) were based on Miller and Modigliani (1961)
argued that the share price is independent of dividend policy the
value of a share reflects both the future cash flow stream and
future growth opportunities. MM acknowledged the dividend changes
influence stock price and attributed this phenomenon to the
information content of dividends. A stock price change resulting
from a change in dividend payout because of the informational
content of dividends represents differences in the private
information known by corporate managers and the information
available to the public. The results of early empirical attempts to
support the information content of dividend hypothesis are
ambiguous. Separate studies by Fama (1969), Pettit (1972, 1976),
Griffen (1976) and Laub (1976) showed positive (negative) excess
returns accruing following unexpected dividend increases
(decreases). Work by And (1975) and Gonedes (1978) failed to
support the premise, whereas Watts (1973) found that transaction
costs preclude excess return capture by market participants.
Charest (1978) reported that earnings announcement and dividend
announcement effects are confounded. Inconsistencies in the results
can be traced to differences in data, sample period, methods of
analysis, and model misspecification. (2) George M. Frankfuter and
Bob G. Wood with James Wansley, 2003, Dividend Policy Theory and
Practice, Elsevier Science
- 9. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock
Returns Response to Event Announcements 5 Supported by cash flow
signaling theory, Bhattacharya, (1979, 1980) extended the model to
a two-period inter-temporal setting, whereas Talmor (1981) expanded
it to a multivariate model with several valuation parameters and
signaling mechanisms. In their extension of the model, Makhija and
Thompson (1986) defined the least profitable firm differently than
Bhattacharya (1979). If all firms have nonzero earnings, the
dividend/earnings relation will be nonlinear. To ensure equilibrium
existence, the dividend policy of the most profitable firms must be
constrained and additional limiting conditions likely have to be
imposed. John and Williams (1985) developed a signaling model with
multiple equilibriums using the assumption that firms with unique
private information will receive varied marginal benefits following
changes in dividend policy. There are many theories about stock
split such as such as Dolley (1933) examined the price the price
effects of stock splits, studying nominal price changes at the time
of the split. Myers and Bakay (1948), Barker (1956, 1957, 1958) and
Ashley (1962) are examined of studies during time period. In the
late 1960s, seminal studies by Ball and Brown (1968) and Fama,
Fisher, Jensen and Ball and Brown considered the information
content of earnings. 2. Models for Measuring Normal Performance (3)
2.1 Statistical models Model from statistical assumption concerning
the behavior of asset returns and do not depend on any economic
arguments. In contrast, models in the second category rely
___________________________________________ (3) John Y.
Campbell/Andrew W. Lo/A. Craig MacKinlay 1997, The econometrics of
Financial Markets, Princeton University Press, Princeton, New
Jersey
- 10. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock
Returns Response to Event Announcements 6 on assumptions concerning
investors behavior and are not based solely on statistical
assumptions. It should, however, be noted that to use economic
models in practice it is necessary to add statistical assumptions.
Constant-Mean-Return Model Let i the ith element of , the mean
return for asset i. Then the Constant-Mean- Return Model is: Rit =
i + it E[it ] = 0 Var [it ] = 2 Where: Rit : the ith element of Rt,
is the period-t return on security i it : the disturbance term 2:
the (I,i) element of Although the constant-mean-return model is
perhaps the simplest model, Brown and Warner (1980, 1985) find it
often yields results similar to those of more sophisticated models.
This lack of sensitivity to the model choice can be attributed to
the fact that the variance of the abnormal return is frequently not
reduced much by choosing a more sophisticated model. Market Model
The market model is a statistical model which relates the return of
any given security to the return of the market portfolio. The
models linear specification follows from the assumed joint
normality of asset returns. For any security i we have:
- 11. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock
Returns Response to Event Announcements 7 Rit = i + iRmt + it E[it]
= 0 Var[it] = 2 Where: Rit, Rmt are the period-t returns on
security i and the market portfolio. it: the zero-mean disturbance
term i, i and 2: the parameters of the market model The market
model represents a potential improvement over the
constant-mean-return model. By removing the portion of the return
that is related to variation in the markets return, the variance of
the abnormal return is reduced. This can lead to increased ability
to detect event effects. The benefit from using the market model
will depend upon the R2 of the market model regression. Other
statistical models A number of other statistical models have been
proposed for modeling the normal return. A general type of
statistical model is the factor model. Factor models potentially
provide the benefit of reducing the variance of the abnormal return
by explaining more of the variation in the normal return. Sometimes
limited data availability may dictate the use of a restricted model
such as the market-adjusted-return model. This model can be viewed
as a restricted market model with i constrained to be 0 and i
constrained to be 1. 2.2 Economic models Economic models restrict
the parameters of statistical models to provide more constrained
normal return models. Two common economic models which provide
- 12. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock
Returns Response to Event Announcements 8 restrictions are the
Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory
(APT). The CAPM was commonly use in event studies during the 1970s.
During the last ten years, however, deviations from the CAPM have
been discovered and this casts doubt on the validity of the
restriction imposed by the CAPM on the market model. Some studies
have used multifactor normal performance models motivated by the
APT. The APT can be made to fit the cross-section of mean returns,
so chosen APT model does not impose false restrictions on mean
returns. On the other hand, the use of the APT complicates the
implementation of an event study and has little practical advantage
relative to the unrestricted market model. There seems to be no
good reason to use an economic model rather than a statistical
model in an event study. 3. Market Efficiency in Capital Market The
simplest but economically reasonable statement of market efficiency
hypothesis is that security prices at any time fully reflect all
available information to the level in which the profits made based
on the information do not exceed the cost of acting on such
information. The cost includes the price of acquiring the
information and transaction fees. When the price formation in
equity market satisfies the statement, market participants cannot
earn unusual profits based on the available information. The origin
of the Efficient Market Hypothesis (EMH) was contributed by
Bachelier (1900) and the empirical research of Cowles (1933). The
modern literature in economics begins with Samuelson (1965), whose
contribution is neatly summarized by the title of his article:
Proof that Properly anticipated prices fluctuate randomly. This
classical market efficiency definition was summarized by Fama
(1970), and developed at length by researchers in the field (4)
___________________________________________ (4) Cheng-Few Lee,
Alice C.Lee, 2006, Encyclopedia of Finance, Springer Science -
Business Media, Inc
- 13. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock
Returns Response to Event Announcements 9 Fama distinguished market
into three forms: Weak-form efficiency: The information set
includes only the history of process or returns itself. Semi-strong
form efficiency: The information set includes all information known
to all market participants (public available information)
Strong-form efficiency: The information set includes all
information known to any market participant (private information)
The Market Efficiency Model Assumption that the condition of market
equilibrium can be stated in terms of expected returns. Although
there exists diversified expected return theories, they can in
general be expressed as follows: E( pi,t+1) = [1 + E(ri,t+1 | It)]
x pi,t Where: E : the expected value operator pi,t : the price of
security i in period t ri,t+1 : the one-period rate of return on
security i in the period ending at t+1 E(ri,t+1|It): the expected
rate of return conditional on information (i) available in period t
4. Vietnam Stock Market Overview Introduction Along with the
implementation of the equalization plan of Vietnam (started from
1991), the stock market has been established, started by
establishing of Vietnam State
- 14. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock
Returns Response to Event Announcements 10 Securities Commission
(SSC) in 1996, followed by the Vietnam Securities Depository and
Hochiminh Stock Exchange (in 2000) and Hanoi Stock Exchange (in
2005). The Vietnam stock market, formally known as the Securities
Trading Centre (STC) located in Ho Chi Minh City, was launched on
July 28th 2000. At the opening trading session, only two individual
stocks with a total market capitalization of VND 444,000 million
(about USD27.95 million) were traded on the market. Over ten years
of operation (at the end of June 2010), the number of listed
companies have increased to 666 with a total market capitalization
of VND703,692 billion (equal to USD37 billion), with two stocks
exchanges are Hochiminh Stock Exchange (HOSE) and Hanoi Stock
Exchange (HASTC). Although the market has significantly grown over
the period, it is still rather thin, the market size for HOSE and
HASTC is only around 40%/GDP. Organization and operation of the
stock market This section briefly introduces the organization and
operation of the stock market in Vietnam. Specifically, the section
focuses on regulations regarding some organizations involved in the
market and how the market works. The State Securities Commission
(SSC) The State Securities Committee, officially established in
November 1996, is responsible for the organization, development and
supervision of the countrys securities market. Before February
2004, the SSC had operated as an organ directly belonging to the
Prime Minister. During this period, the SSC could not well regulate
the market due to some structural weaknesses. Consequently, the
Prime Minister decided, on February 19th 2004, to hand over the
task of managing the SSC to the Ministry of Finance. The Government
hopes that the transfer would help to improve the performance of
the market, which has not been performing well since its
- 15. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock
Returns Response to Event Announcements 11 establishment in July
2001. Under the new model of operation, the main functions of the
SSC are as follows: Issuing, implementing and enforcing regulations
and guidelines related to securities and securities markets.
Organizing and managing stock trading centre in Vietnam. Receiving
feedbacks for securities companies, securities advisers, securities
investment funds, and securities depositaries & custodians.
Training the profession for the securities industry. Stock
Exchanges The Stock Exchanges are the organization under the
control of the SSC. There are two stocks exchanges: (1) Hochiminh
Stock Exchange (HOSE): located in Hochiminh City, for listing (but
not limited to) the big firms. HOSE has the number of listed
companies of 246 with a total market capitalization of VND555,831
billion (equal to USD29.2 billion) (2) Hanoi Stock Exchange
(HASTC): located in Hanoi, for managing the listing (but not
limited to) the small firms, the Over-The-Counter trading, and the
Specific Bond Market. HASTC has the number of listed companies of
305 with a total market capitalization of VND147,600 billion (equal
to USD7.8 billion) The Stock Exchanges assumes responsibilities of
organizing, executing and supervising securities trading activities
on the Centre. Specifically, responsibilities and rights of the STC
include the followings:
- 16. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock
Returns Response to Event Announcements 12 Organizing, managing and
supervising the trading of listed securities. Managing the
securities trading system. Managing and supervising the listing of
securities. Managing and supervising the information disclosure
activities of listed companies. Managing and supervising activities
of the members of the Stock Exchanges. Organizing, managing and
conducting the market information disclosure. Investment Banking
Corporation By regulation, Investment Banking Corporation can be
established in either joint- stock or limited liability ones.
Moreover, the main businesses of the Investment Banking Corporation
could consist of brokerage, investment, asset management,
underwriting, and financial and securities investment advisory.
Investment Banking Corporation, which are licensed by the SSC as
brokers or dealers, are eligible to register as members of the
stock exchanges HOSE and/or HASTC. Importantly, only members of the
stock exchange have been permitted to trade securities through the
trading system of the stock exchanges. Listing requirements To
ensure the credibility and integrity of the stock exchanges, the
Government has placed special emphasis on the overall quality of
listed companies by issuing the criteria and regulations for
listing. A company must comply with all of the listing requirements
prior to obtaining a listing license. The qualifications for
listing are as follows: Being a joint-stock company with a minimum
capital of VND80 billion (for listing in HOSE) or 10billions (for
listing in HASTC) Having profits in the last two consecutive years
before the year of applying for listing.
- 17. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock
Returns Response to Event Announcements 13 Having the commitment
made by members of the firms Board of Directors, Board of
Management, and Board of Supervisors to hold at least 50% of their
shares for six months from the date of listing. Having at least 100
outside investors, holding at least 20%/share capital, as for
joint-stock company having share capital of VND100 billion or more,
a rate of 15% is applied. Information disclosures of listed
companies Listed companies are required to disclose publicly all
information that is important for investors' investment decisions.
The stock exchange has implemented a full disclosure policy,
allowing investors to receive accurate, adequate and timely
information in order to ensure market transparency and integrity.
Practically, the information disclosure is conducted through the
mass media or the Bulletin of the stock exchange. Listed firms
information, which is obligated to disclose can be classified into
two groups: regular and irregular information. Regular information
includes quarterly, semi-annual, and annual financial statements.
By regulation, within 10 days from the date of completing annual
financial statements, listed companies have to disclose publicly
their audited financial information on three consecutive issues of
a national newspaper or a local newspaper at the place where the
head office of a listed company is located or on the Bulletin of
the Stock Exchanges. For the quarterly and semi-annual financial
statements, listed companies have to disclose them within five days
from the date of completion on the Bulletin of the Stock Exchanges.
Irregular information consists of any information related to events
that happen irregularly and should affect investors decisions. The
listed companies are required to disclose information within 24
hours from the occurrence of any of the following events:
- 18. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock
Returns Response to Event Announcements 14 Having significant
changes in conditions for its business activities. Suffering from a
loss equivalent to or more than 10 percent of its equity The listed
company, its member(s) of the Board of Directors, member(s) of the
Board of Management, Board of supervisors, and Chief Accountant
being prosecuted by the legal authority, being convicted by a court
concerning operations of the company; and violating tax laws as
stated by the tax authority Having changes in business strategy and
scope. Having decisions on expanding its business activities, an
investment worth 10 percent or more of another companys equity, or
buying or selling fixed assets worth 10 percent or more of its
equity. Falling into bankruptcy situation, making a decision on
corporate merge and acquisition, split, and dissolution. Signing a
loan agreement or issuing bond, which worth 30% or more of its
equity. Changing the Chairperson of the Board of Directors, or more
than one-third of the members of the Board of Directors, or
Director (General Director); approving of the resolutions of
shareholders meeting. Having other events that may considerably
affect the share price or investors benefits. Stock split,
additional issuance to increase its share capital Issuing bonus
shares or share dividends, which is worth more than 10 percent of
the equity Applying for de-listing. Foreign participation Foreign
investors (institutions and individuals) can buy or sell shares on
the Vietnam Stock Exchanges through investment banking corporation.
However, their ownership (aggregation ownership of all foreign
investors) in a listed firm is limited to 49 percent of the share
capital, especially in case of banking sector this ratio is only
30
- 19. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock
Returns Response to Event Announcements 15 percent. In addition,
foreign investors who wish to participate on the stock exchange are
required to register through a licensed custodian who holds shares
on behalf of foreign investors. Currently, three foreign banks (the
Hong Kong and Shanghai Banking Corporation, Deutsche Bank AG and
Standard Chartered Bank) have licensed by the SSC to provide
custodian services for foreign investors. Once registered, a
securities transaction code is issued to the foreign investor who
may then open a trading account with one or more of the thirteen
Investment Banking Corporations for trading securities on the Stock
Exchange. Moreover, foreign securities business institutions are
allowed to buy shares of securities and/or investment fund
management companies, or contribute capital to establish a newly
joint-venture securities and/or investment fund management
companies with Vietnamese partners. However, the proportion of
capital contribution by foreign partners in a joint-venture is not
more than 49 percent of the firms share capital. Vietnam stock
market has its characteristics as following: Market size is around
40% GDP. Legal framework is not developed enough. Derivatives are
not allowed in Vietnam stock markets that lead to many investors
activities are performed not by laws. Regulated band for maximum
daily price change in trading, they are 5% and 7% for HOSE and
HASTC respectively.
- 20. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam
Stock Market: How Stock Returns Response to Event Announcements 16
CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING 1. Study
methodology Our target is to find the stock prices (or firm values)
behavior prior to and after selected economic event announcements
in Vietnam stock market. This can be reflected through distribution
of the sample data parameters and we can understand that
characteristic of the market in term of event announcements. Below
process will be gone through: To define the event types to be
studied and its reasons. To scan data and determine criteria to
select sample that presents the population. To categorize the
event. To determine sample interval and event window. To compute
necessary parameters of the sample with assumption of Vietnam
market model and use Visual Basic Application (VBA). Results:
descriptive analysis 1. Aggregation of abnormal returns over time:
all event window and pre- event versus post-event period 2.
Cumulative abnormal returns sensitivity to compound ratios: 3.
Density chart of aggregated abnormal returns over pre-event period
4. Density chart of aggregated abnormal returns over post-event
period 5. Density chart of pre-event aggregated abnormal returns by
event type 6. Density chart of post-event aggregated abnormal
returns by event type 7. Distribution function chart of pre-event
aggregated abnormal
- 21. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam
Stock Market: How Stock Returns Response to Event Announcements 17
8. Distribution function chart of post-event aggregated abnormal
Conclusion 2. Events to be studied in this paper There are many
event announcements may influence the company value. They can be
finance-related events such as earnings announcement, dividend
payout, share split; M&A; or firms activity-related events such
as management team change, firms legal case; or regulatory-related
event such as changes in regulations, change in political
institutions. In this paper our team limits the study in events
that much relation to corporate finance of listed firms including:
Financial reports announcement; Dividend announcement; Stock
issuance to existing shareholder announcement: Non-conditional:
Stock issuance without additional capital contribution Conditional:
Stock issuance with additional cash contribution of VND10,000 per
each The reason for our choice is they are all economic events and
are considered as firms operation output, firms operational
efficiency instead of social events that seems to be
uncontrollable. As a result we can use events to measure major
change in endogenous value of the listed firms. Specific to Vietnam
market, a listed company may discretionary announce cash dividend
payout, or share dividend right, or stock split right to existing
shareholders from time to time. For stock issuance to shareholder,
there may be a condition of additional pay at face value or not. We
therefore standardize these kinds of
- 22. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam
Stock Market: How Stock Returns Response to Event Announcements 18
shareholder benefit to a comparable unit and treat relative events
as a homogeneous event type called right issue. In summary our
studied events are periodic earnings statement release and right
issue announcement. 3. The Population and The Sample The population
is above mentioned events occurred in Vietnam stock market that
leaded to changes in price of stocks listed in two stock exchanges
HOSE and HASTC. At the moment there are 666 stocks are listed in
Vietnam stocks market. During nearly ten years of operation to
date, Vietnam market has 66 stocks being listed each year in
average. To have a typical sample in Vietnam stock market
environment, we have to find a solution that enables us to choose
stocks those: are comparable in term of maximum daily price change
(trading band); are comparable in term of time horizon; include
both events being investigated; represent all firms across over
market capitalization size, business sectors; have the high traded
volume in average so stocks liquidity is considered mainly decided
by demand versus supply relationship. The solution is setting some
criteria as follows: 1. To avoid dispute on return computation by
skipping the affect of different daily price band between two
floors: choose HOSE listed stocks only;
- 23. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam
Stock Market: How Stock Returns Response to Event Announcements 19
2. To choose long enough observation period: survey data over
two-year time from Mar 2008 to Mar 2010; 3. To choose stocks that
have been listing for more than 3 years as at Mar 2010 so its
sufficient to apply beta in computation of normal and abnormal
return; 4. To choose high-liquid stocks to reduce manipulation
impact; 5. To choose stocks across variance business sectors:
manufacturing (FMCG, steel etc), banking, services, real estate
developer, infrastructure developer, constructional materials,
agricultural products processing, technology, industrial property
developer, oil, power, textile and garment, transportation, assets
management. Data collection format: SYMBOL DATE CLOSING PRICE
VOLUME ADJ CLOSING PRICE ANV 3/3/2008 69,000 66,340 60,610 ANV
3/4/2008 66,500 207,480 58,850 ANV 3/5/2008 63,500 213,560 56,190
ANV 3/6/2008 66,500 3,950 58,850 ANV 3/7/2008 69,500 173,780 61,510
ANV 3/10/2008 72,500 194,590 64,150 Source: HOSE Adjusted closing
price is the price that was adjusted from historical closing price
by dividing by compounded rate. This price was smooth and actually
reflects stock price change though time. All subsequent
computations are based on adjusted closing price.
- 24. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam
Stock Market: How Stock Returns Response to Event Announcements 20
4. Define and categorize the events 4.1 Earnings events: Each firm
announces their earnings periodically. Four pieces of information
are collected: the expected earnings, the event date, the actual
earnings and the event definition. We started with annual plan
NOPAT of the firms that adopted by its Board of Shareholders
beginning of each year as the markets expected earnings. The
overview of the data and sample shows that to clearly assess the
impact of the earnings announcement on the market valuation of the
firm we need to add 25% deviation on top of plan NOPAT to define
whether the actual earnings are really good or bad compared to
expected earnings. Event date is the date when the quarter
financial report of the firm is released officially, i.e. the
report is submitted to Hochiminh Stock Exchange. Actual earnings is
reported earnings of the firm In order to examine the impact of the
earnings announcement, we assign earnings announcements into two
event categories: positive earnings for those exceed 125% of
markets expected earnings and negative earnings for those behind
75% of markets expected earnings. 4.2 Right issue events: We
collect all announcements of selected 39 firms regarding: Cash
dividend payout
- 25. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam
Stock Market: How Stock Returns Response to Event Announcements 21
Share dividend Share split Share bonus Additional share issuance
with condition of additional capital contribution by existing
shareholders Sometimes more than one benefit above is combined in a
firms announcement. Usually firm announces for shareholder benefit
upon having a good earnings. Three pieces of information are
collected: the event date, the benefit rate for each relative
announcement, all benefits will be combined to find a compounded
rate that represent shareholders benefit in each announcement. Our
group names this compounded rate as right issue. In case of annual
basis this compounded rate represents dividend yield of the stock.
The event date is official date that firm announces the right
issue. The compounded rate is to standardize the right issue rate
of stocks with different trading price, different type of
shareholders benefit announcement. Formula is: Right issue rate Y =
Pt-1 / [(Pt-1+SI*IP-FV*CD)/(1+SD+SB+SI)] Where: Y is standardized
compounded rate. This is also the rate to use to adjust closing
prices of the initial data at of each relative right execution date
t is the date of right issue execution date, that is usually about
10-20 trading after event date Pt-1 is closing price of stock on
the date (t-1), i.e. 1 day prior to right execution date SI is rate
in case share issuance to existing shareholders with additional
capital contribution request
- 26. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam
Stock Market: How Stock Returns Response to Event Announcements 22
IP is issuing price, i.e. the amount in VND shareholder has to pay
for each share when execute the right FV is face value of the share
equal to VND10,000 in Vietnam market CD is the rate for cash
dividend SD is rate for share dividend SB is the rate for share
bonus or share split in case no additional capital contribution
request 4.3 Sample size With mentioned assumption, our sample
consists 231 events categorized into 3 types: 103 positive
earnings, 78 negative earnings and 50 right issues events across
over 39 selected stocks during two-year period that we strongly
believe they represent population characteristic. 5. Sampling
interval and time line From data collected, we set sampling
interval to one day then daily return are used. We investigate the
stock return over: 21-day event window that comprises of 10
pre-event days, the event day and 10 post-event days. 41-day event
window that comprises of 20 pre-event days, the event day, and 20
post-event days. 61-day event window that comprises of 30 pre-event
days, the event day and 30 post-event days.
- 27. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam
Stock Market: How Stock Returns Response to Event Announcements 23
We dont investigate longer event window to avoid overlap between
two event windows that leads to incorrect cumulated returns. Event
timeline can be illustrated as follow: | T0 || T1 || T2 | Where: |
T1 | is event date | T0 | to | T1 | is pre-event period | T1 | to |
T2 | is post-event period 6. Parameters computation 6.1 Actual
daily stock return Ractual i, t = (Pi, t / Pi, t-1) - 1 Where: Pi,
t is adjusted closing price on date t Pi, t-1 is adjusted closing
price on date t-1 The numbers are pulled out from original data
collected 6.2 Estimation of expected daily return - Normal daily
stock return There are some approaches to compute normal return of
given stocks. For simplicity, we use statistical market model as a
basis to measure normal return with below assumption for samples
characteristics: Firm stock returns are linear with VNIndex return
at slope ;
- 28. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam
Stock Market: How Stock Returns Response to Event Announcements 24
Regardless the estimation window, the is constant for each stock
during whole sample study period; We all understand that it is much
complicated to define parameter i. Particularly in Vietnam stock
market context, there is no sufficient data to compute . In other
word, limited data availability dictates the use of adjusted market
model with i constrained to be zero; If the event does not occur,
it is considered zero too; Firms market capitalization portion in
sample is remained unchanged or small enough that it has little
effect on empirical work. Normal return is considered as markets
expectation in case the event would not take place. Ri,t = i +
iRm,t + i,t Where: Ri,t, Rm,t are the period-t return of stock i
and of the market portfolio I,t is zero mean disturbance term i, i
are parameters of market model With above mentioned assumption of i
and it are zero, in this research we compute normal return by
formula: Ri,t = iRm,t To be independent and with assumption of
efficient market, in application a board- based stock index is used
for market portfolio return and i is of stock i that market accepts
as at March 2010. In this case they are VNIndex return and gathered
from Bloomberg. For example the beta for stock symbol ITA is
1.139.
- 29. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam
Stock Market: How Stock Returns Response to Event Announcements 25
Associated with mentioned assumption, our formula has some
limitations that may lead to slight difference in the result. Model
parameters should depend on non-announcement period. In our
research we eliminate and assume that is fixed. Our dictation may
create correction between the event under analysis and the market
return, for example a part of price variation is already reflected
in ; The result of aggregation abnormal return varies according to
sample size; To allow for normal changes in firms stock price
relative to the market only whilst actually there are reasons for
stock price movement such as firm directors change, M&A
activities, competition pressure and other uncontrollable events;
The event actually may not be independent of the behavior of the
stock price in short, event date is endogenous 6.3 Estimation of
Abnormal daily stock return due to event To assess the events
impact on the stock price, we need to measure the variation of the
return arising from event announcement over the event window. It
interprets abnormal return by taking actual return minus expected
return during the event window: ARi,t = Ractual i, t - Ri,t Where:
ARi,t is abnormal return of stock i at date-t
- 30. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam
Stock Market: How Stock Returns Response to Event Announcements 26
Ractual i, t is actual return of stock i at date-t Ri,t is expected
return of stock i at date-t 6.4 Aggregation abnormal returns At
this stage we have to assume that abnormal returns for all stocks
are independent. With this assumption, we compute abnormal return
of given stocks and then aggregate them in order to draw overall
inferences for the event of interest. The aggregation is along two
dimensions: through time then across stocks. The first is
aggregation of abnormal return through time series for individual
stock over selected period within event window: this is Cumulative
Abnormal Return (CAR). Since the impacts of event on the stock
price are sometimes not immediately, so we must access CAR to get
abnormal return over pre-defined period of time. Pre-event CAR:
CARi, t0,t1 = ARi,t (t run T0 to T1) Post-event CAR: CARi, t1,t2 =
ARi,t (t run from T1 to T2) Event window CAR: CARi, t0,t2 = ARi,t
(t run from T0 to T2) Where: CARi is cumulated abnormal return of
stock i over defined period In this paper, we do aggregate across
different time period to see if the effect develops over time and
to find meaningful/effective event window. The second then is
aggregation through time and cross-section, i.e. aggregation of
CARs of all stocks through selected period within event window:
from T0 to T1 (Pre-
- 31. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam
Stock Market: How Stock Returns Response to Event Announcements 27
event CAR), from T1 to T2 (Post-event CAR), or from T0 to T2 (event
window CAR) then to get the Average CAR. Average pre-CAR = CARi,
t0,t1 / N (i run across 39 stocks) Average post-CAR = CARi, t1,t2 /
N (i run across 39 stocks) Average event window CAR = CARi, t0,t2 /
N (i run across 39 stocks) Where N is the number of stocks employed
in related event. 6.5 IT technique applied Our group writes VBA
codes to generate all desired CAR, aggregation CAR and average
aggregation CAR to demonstrate our findings (appendix II) The data
after processing is illustrated as follows: SYMBOL DATE ADJ PRICE
ACTUAL RETURN NORMAL RETURN=Be ABNORMAL RETURN PRECAR POSTCAR
COMPOUNDED RATE EARNING (P vs N) ANV 7/24/2008 39,390 -2.86% -2.33%
-0.53% ANV 7/25/2008 38,230 -2.94% -1.54% -1.41% ANV 7/28/2008
37,150 -2.83% 1.28% -4.10% -28.69% -1.17% Negative Earning ANV
7/29/2008 36,710 -1.18% 2.38% -3.56% CII 2/5/2009 14,720 -2.45%
-3.17% 0.72% CII 2/9/2009 16,010 3.56% 2.31% 1.25% CII 2/10/2009
15,390 -3.87% -2.11% -1.76% CII 2/11/2009 15,030 -2.34% -2.25%
-0.09% 5.32% 16.16% 1.0474 CII 2/12/2009 14,850 -1.20% -0.05%
-1.15% CII 2/13/2009 14,780 -0.47% -0.63% 0.15% CII 7/15/2009
23,580 -0.84% 2.22% -3.06% CII 7/16/2009 24,480 3.82% 1.64% 2.17%
CII 7/17/2009 24,350 -0.53% -1.21% 0.68% -0.83% 6.93% Positive
Earnings
- 32. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 28 CHAPTER 3:
FINDINGS AND ANALYSIS 1. Aggregation of abnormal return over time
CAR 1.1 CAR over event window of 61 days 15.0% 10.0% 5.0% 0.0% 5.0%
10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 30 20 10 0 10 20 30 CAR Time
Figure1.AverageCARovereventwindow groupedbyeventtype
POSITIVEEARNINGS MEAN NEGATIVE EARNINGS MEAN RIGHTISSUES MEAN
Trading day=0:theannouncementdate a) We aggregate abnormal return
over time to see the effect of the events. An event window of 61
trading days is used to calculate the over CAR. This event window
consists of 31 days PRE announcement period (including the
announcement date) and 30 days POST announcement period. Then the
computed CARs are averaged according to its event types.
- 33. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 29 b) Figure 1 shows
that for positive earnings and right issues announcements, the CAR
start to increase about 20 days before the announcement date and
continue to increase for the next 20 days after the announcement
and flat out afterward. c) The increased CAR in the PRE
announcement period can be attributed to information leakage. This
truly reflects current situation information asymmetry in
Vietnamese stock market. d) The process of this stock return
behavior can be characterized as follows: Before the information is
known to the public, the people who knows the information first buy
the stocks (or having their relatives buy the stocks) Then they
informally release the information to the public. This information
is rumors. The public usually follow the rumors since they are
proven to right. This is seen how the PRE CAR is accelerated. When
the information is officially announced, the market continues to
act on it and the effects is subsidized after about 20 trading
days. e) Returns behavior on negative earnings is quite different
than the positive earnings and can be summarized in the followings:
There is no CAR movement during the PRE period. This is due to
short selling is not allowed, thus it is difficult to take
advantage of the information.
- 34. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 30 The effect on post
period is not as strong as compared to that of the positive
earnings. This can be explained by the following reasons: Market in
general focuses more on positive information than negative
information. As mentioned above, short sell is not allowed so
investors cannot make profit based on negative information.
Overall, the degree of negative earnings is lesser than that of the
positive the positive one. Since the determination whether the
earnings is positive or negative is based on comparing the actual
earnings against the companys earnings forecast. The company
management tends to be more conservative so that it is easier to
beat the expectation. The motivation for beating the expectation is
for stock price increase, so as their bonuses and job security. The
major shareholders tend to fights against downward price movements.
They would use their private source of money to buy the stock when
there is price downward pressure. This could be done through
trading accounts under different names so transactions on these
accounts would not need to notify with the exchange Committee.
- 35. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 31 1.2 CAR separated
from PRE and POST period 4% 2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 0
5 10 15 20 25 30 CAR Time Figure2.1PositiveEarning
AverageCAR(PREperiodVsPOSTperiod) AverageCARoverPREperiod
AverageCARoverPOSTperiod 16% 14% 12% 10% 8% 6% 4% 2% 0% 2% 0 5 10
15 20 25 30 CAR Time Figure2.2NegativeEarning
AverageCAR(PREperiodVsPOSTperiod) AverageCARoverPREperiod
AverageCARoverPOSTperiod
- 36. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 32 0% 5% 10% 15% 20%
25% 0 5 10 15 20 25 30 CAR Time Figure2.3RightIssue
AverageCAR(PREperiodVsPOSTperiod) AverageCARoverPREperiod
AverageCARoverPOSTperiod a) To see the effects of CAR over the PRE
and POST period separately, CARs for PRE period stops at the end of
the announcement day. CAR for POST period is calculated from the
first day after the announcement day. Figure 2.1 and figure 2.3
show that CAR is stronger during post period than pre period for
positive earnings and right issue events, while the reverse is true
for negative earnings as shown in figure 2.2. b) Strong POST CAR of
positive earnings can be attributed to Post Earnings Announcement
Drift effect presented by Bernard and Thomas (1989). c) Strong POST
CAR of right issue can be partially explained that it would
compensate the time value of the capital that is locked up during
the right issue process. In other word, there is a share price
adjustment (normally adjusted down) associated with right issue
thus existing shareholders will loose the time value of the locked
up capital.
- 37. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 33 2. CAR sensitivity
by compound ratios: 10% 5% 0% 5% 10% 15% 20% 25% 30% 30 20 10 0 10
20 30 CAR Time Figure3.CARSensitivityToCompoundedRatios
MEANRatio11.05 MEANRatio1.051.1 MEANRatio>1.1 Figure 3 shows
that right issues with low compounded ratio and high compounded
ratios have strong CAR while right issues with medium compounded
ratio have weaker CAR. This is due to right issue events with low
compounded ratio consists of mainly cash dividends while medium and
high ratio consists of share issues (including share dividend,
share bonus, rights to buy). This show cash dividend is more
attractive than that of share issues unless share issues with high
compounded ratio. Despite the fact that cash dividend is not
necessary beneficial to shareholders because of the shareholder
return might be higher average market return. In this case, the
company would rather not pay cash dividend since it will result a
higher return than the market return. For the case of share issues,
it is also not necessary positive since the effect of share
dilution will result in a lower earnings per share in the future.
However, the investors perception in Vietnam about cash dividend
and share issues is strongly favorable.
- 38. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 34 3. Density chart
of CAR over PRE period .0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 20% 15%
10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% NUMBEROFOBSERVATIONS CAR
Figure3.1DensitychartofCARoverPRE11periodbyeventtype
POSITIVEEARNINGS Mean:5.69% Std.Deviation:7.54% Kurtosis:1.4
Skewness:0.9 NEGATIVEEARNINGS Mean:(7.58%) Std.Deviation:6.1%
Kurtosis:0.3 Skewness:1.3 RIGHTISSUE Mean:8.67% Std.Deviation:8.16%
Kurtosis:1.3 Skewness:1.6 .0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 35%
30% 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
NUMBEROFOBSERVATIONS CAR
Figure3.2DensitychartofCARoverPRE21periodbyeventtype
POSITIVEEARNINGS Mean:12.55% Std.Deviation:8.99% Kurtosis:4.8
Skewness:2.2 NEGATIVEEARNINGS Mean:(13.67%) Std.Deviation:7.72%
Kurtosis:3.7 Skewness:2.1 RIGHTISSUE Mean:10.43%
Std.Deviation:8.98% Kurtosis:4.6 Skewness:2.2
- 39. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 35 .0 5.0 10.0 15.0
20.0 25.0 30% 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40%
45% NUMBEROFOBSERVATIONS CAR
Figure3.3DensitychartofCARoverPRE31periodbyeventtype
POSITIVEEARNINGS Mean:11.37% Std.Deviation:11.42% Kurtosis:2.8
Skewness:1.2 NEGATIVEEARNINGS Mean:(15.24%) Std.Deviation:12.03%
Kurtosis:2.0 Skewness:0.9 RIGHTISSUE Mean:11.75%
Std.Deviation:14.40% Kurtosis:2.5 Skewness:1.6 Figure 3.1 shows
density chart of CAR over 11 days PRE period for positive earnings,
negative earnings and right issue events. Figure 3.2 and 3.3 is the
same chart with CAR over 21 and 31 PRE period respectively. For all
three PRE period, positive earnings event exhibits a more peak than
that of the negative earnings and right issue event suggesting
positive earnings event has higher probability of having CAR fall
around its mean. 4. Density chart of CAR over POST period .0 5.0
10.0 15.0 20.0 25.0 30.0 35.0 15% 10% 5% 0% 5% 10% 15% 20% 25% 30%
NUMBEROFOBSERVATIONS CAR
Figure4.1DensitychartofCARoverPOST10periodbyeventtype
POSITIVEEARNINGS Mean:0.24% Std.Deviation:8.55% Kurtosis:4.9
Skewness:2.2 NEGATIVEEARNINGS Mean:(1.27%) Std.Deviation:9.34%
Kurtosis:3.8 Skewness:2.1 RIGHTISSUE Mean:4.18% Std.Deviation:8.63%
Kurtosis:3.8 Skewness:2.1
- 40. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 36 5 10 15 20 25 30
20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
NUMBEROFOBSERVATIONS CAR
Figure4.2DensitychartofCARoverPOST20periodbyeventtype
POSITIVEEARNINGS Mean:2.65% Std.Deviation:12.59% Kurtosis:6.0
Skewness:2.3 NEGATIVEEARNINGS Mean:(0.21%) Std.Deviation:13.02%
Kurtosis:2.8 Skewness:1.9 RIGHTISSUE Mean:8.26%
Std.Deviation:14.33% Kurtosis:0.7 Skewness:1.3 .0 5.0 10.0 15.0
20.0 25.0 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
NUMBEROFOBSERVATIONS CAR
Figure4.3DensitychartofCARoverPOST30periodbyeventtype RIGHTISSUE
Mean:8.22% Std.Deviation:16.97% Kurtosis:(0.2) Skewness:1.0
NEGATIVEEARNINGS Mean:2.24% Std.Deviation:14.64% Kurtosis:(0.1)
Skewness:0.7 POSITIVEEARNINGS Mean:4.38% Std.Deviation:15.83%
Kurtosis:0.8 Skewness:1.4 Figure 4.1 to 4.3 are constructed the
same as figure 3.1 to 3.3 but using POST period of 10, 20 and 30
days. For all three period, positive earnings event again shows a
higher peak than negative and right issue. However, right issue
event exhibits higher mean overall. The density chart of PRE CAR in
general has higher peak than that of the POST counterpart, which
indicates the mean of the PRE is more meaningful than that of
the
- 41. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 37 POST. The PRE
observation has higher probably to fall near its mean compared to
the POST observation. POST 20 and 30 also show a long tail on the
right with CAR up to 45 50% suggests there are some events exhibits
strong abnormal returns in the post period. 5. Density chart of PRE
CAR by event type 0 5 10 15 20 25 30 35 15% 10% 5% 0% 5% 10% 15%
20% 25% 30% 35% 40% 45% NUMBEROFOBSERVATIONS CAR
Figure5.1DensitychartofPOSITIVEEARNINGCARoverPREperiod PRECAR11
Mean:5.69% Std.Deviation:7.54% Kurtosis:1.2 Skewness:1.3 PRECAR21
Mean:12.55% Std.Deviation:8.99% Kurtosis:2.3 Skewness:1.6 PRECAR31
Mean:11.37% Std.Deviation:11.42% Kurtosis:0.8 Skewness:1.2 0 5 10
15 20 25 30 35 40% 35% 30% 25% 20% 15% 10% 5% 0% 5% 10% 15%
NUMBEROFOBSERVATIONS CAR
Figure5.2DensitychartofNEGATIVEEARNINGCARoverPREperiod PRECAR11
Mean:(7.85%) Std.Deviation:6.1% Kurtosis:(1.6) Skewness:0.3
PRECAR21 Mean:(13.67%) Std.Deviation:7.7% Kurtosis:0.8 Skewness:1.4
PRECAR31 Mean:(15.24%) Std.Deviation:12% Kurtosis:0.3
Skewness:0.9
- 42. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 38 0 2 4 6 8 10 12 14
16 18 20 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
NUMBEROFOBSERVATIONS CAR
Figure5.3DensitychartofRIGHTISSUECARoverPREperiod PRECAR11
Mean:8.67% Std.Deviation:8.1% Kurtosis:1.7 Skewness:1.7 PRECAR21
Mean:10.4% Std.Deviation:8,9% Kurtosis:3.4 Skewness:1.9 PRECAR31
Mean:11.7% Std.Deviation:14.4% Kurtosis:2.5 Skewness:1.6 Chart 5.1,
5.2 and 5.3 are constructed by drawing PRE CAR for positive
earning, negative earnings and right issue event respectively. For
positive and negative earnings events, kurtosis value of PRE 21
days are higher than that of period 11 and 31 which means the
distribution of PRE 21 is more peaked than 11 and 31 period. This
indicates that there are high numbers of observations which have
meaningful CAR starting from 21 trading days before the
announcement date. We can conclude that for a given type of event,
there is abnormal return starting from about 21 days before the
official announcement date. This finding confirms with the finding
in section 1. For right issue event, difference between 11,21 and
31 is not as clear as for positive and negative earnings. It also
exhibits a long tail of high CAR on the right.
- 43. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 39 6. Density chart
of POST CAR by event type 0 5 10 15 20 25 30 35 25% 20% 15% 10% 5%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% NUMBEROFOBSERVATIONS CAR
Figure6.1DensitychartofPOSITIVEEARNINGCARoverPOSTperiod POSTCAR10
Mean:0.24% Std.Deviation:8.55% Kurtosis:8.3 Skewness:2.7 POSTCAR20
Mean:2.6% Std.Deviation:12.6% Kurtosis:3.8 Skewness:2.1 POSTCAR30
Mean:4.4% Std.Deviation:15.8% Kurtosis:7.4 Skewness:2.7 0 5 10 15
20 25 30 30% 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40%
NUMBEROFOBSERVATIONS CAR
Figure6.2DensitychartofNEGATIVEEARNINGCARoverPOSTperiod POSTCAR10
Mean:(1.27%) Std.Deviation:9.3% Kurtosis:3.8 Skewness:2.1 POSTCAR20
Mean:(0.21%) Std.Deviation:13.0% Kurtosis:2.8 Skewness:1.9
POSTCAR30 Mean:2.2% Std.Deviation:14.6% Kurtosis:0.6
Skewness:1.2
- 44. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 40 0 2 4 6 8 10 12 14
16 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
NUMBEROFOBSERVATIONS CAR
Figure6.3DensitychartofRIGHTISSUECARoverPOSTperiod POSTCAR10
Mean:4.18% Std.Deviation:8.6% Kurtosis:3.2 Skewness:1.9 POSTCAR20
Mean:8.2% Std.Deviation:14.3% Kurtosis:0.3 Skewness:1.2 POSTCAR30
Mean:8.2% Std.Deviation:16.9% Kurtosis:0.2 Skewness:1.1 Chart 6.1,
6.2 and 6.3 are POST CAR for positive earning, negative earnings
and right issue event respectively. For positive earnings event,
there is no clear difference between 10, 20 and 30 period. The post
mean is lower than the PRE mean suggesting the good news reflect on
price more on PRE period than post period. For negative earnings
event, post 10 show a highest peak. All the mean of all three
period falls around zero indicating that bad new already reflects
on price on the PRE period. For right issue, post 10 exhibits
highest peak, but it has lower mean than post 20 and 30.
- 45. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 41 7. Chart of
distribution function of PRE CAR 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7
0.8 0.9 1.0 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40%
ACCUMULATIVEPROBABILITY CAR
Figure7.1DISTRIBUTIONFUNCTIONofPOSITIVEEARNINGSoverPREperiod
PRECAR11 PRECAR21 PRECAR31 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
1.0 40% 35% 30% 25% 20% 15% 10% 5% 0% 5% 10% 15% 20%
ACCUMULATIVEPROBABILITY CAR
Figure7.2DISTRIBUTIONFUNCTIONofNEGATIVEEARNINGSoverPREperiod
PRECAR11 PRECAR21 PRECAR31
- 46. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 42 0.0 0.1 0.2 0.3
0.4 0.5 0.6 0.7 0.8 0.9 1.0 5% 0% 5% 10% 15% 20% 25% 30% 35% 40%
45% 50% 55% 60% ACCUMULATIVEPROBABILITY CAR
Figure7.3DISTRIBUTIONFUNCTIONofRIGHTISSUEoverPREperiod PRECAR11
PRECAR21 PRECAR31 Figure 7.1 to 7.3 shows the accumulative
distribution function of PRE CAR for positive earnings, negative
earnings and right issue event respectively. For positive earnings
(figure 7.1), PRE 11 shows about 50% of its sample having negative
CAR suggests there is profit taking within the last 11 days before
the announcement date. In other word, for about half of the
observations, market tends to buy around 21 days before and take
profit during the last 11 day before the announcement. Figure 7.2
shows high probability of negative PRE CAR for negative earnings
event. For right issue event, figure 7.3 shows probability
distribution is the same for PRE 11 and 21, while PRE 31 shows a
higher probability for lower CAR and lower probability for higher
CAR comparing to PRE 11 and PRE 21.
- 47. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 43 8. Chart of
distribution function of POST CAR 0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7
0,8 0,9 1,0 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40%
45% ACCUMULATIVEPROBABILITY CAR
Figure8.1DISTRIBUTIONFUNCTIONofPOSITIVEEARNINGSoverPOSTperiod
POSTCAR10 POSTCAR20 POSTCAR30 0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8
0,9 1,0 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25%
30% 35% 40% ACCUMULATIVEPROBABILITY CAR
Figure8.2DISTRIBUTIONFUNCTIONofNEGATIVEEARNINGSoverPOSTperiod
POSTCAR10 POSTCAR20 POSTCAR30
- 48. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How
Stock Returns Response to Event Announcements 44 0 0.1 0.2 0.3 0.4
0.5 0.6 0.7 0.8 0.9 1 30%25%20%15%10% 5% 0% 5% 10% 15% 20% 25% 30%
35% 40% 45% 50% 55% 60% 65% ACCUMULATIVEPROBABILITY CAR
Figure8.3DISTRIBUTIONFUNCTIONofRIGHTISSUEoverPOSTperiod POSTCAR10
POSTCAR20 POSTCAR30 Series chart from 8.1 to 8.3 are the
accumulative distribution functions of POST CAR for positive
earnings, negative earnings and right issue event
respectively.
- 49. CHAPTER 4: CONCLUSION Vietnam Stock Market: How Stock
Returns Response to Event Announcements 45 CHAPTER 4: CONCLUSION
Evidence shows abnormal return exists about twenty days before the
event official announcement date due to information leakage which
is channeled to the market as rumors. This market characteristic is
common in emerging market where investors make their decision based
on rumors which creates herd-style behavior in the market. This
certainly add a new dimension of risk as corporations fundamental
is weighted less than its deserved importance.
- 50. APPENDIX I Vietnam Stock Market: How Stock Returns Response
to Event Announcements 46 APPENDIX I APPREVIATIONS HOSE Hochiminh
Stock Exchange HASTC Hanoi Stock Exchange SSC State Securities
Committee VBA Visual Basic for Applications CAR Cumulative Abnormal
Return PRE Timeline before event date POST Timeline after event
date
- 51. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 47 APPENDIX II VISUAL BASIC
APPLICATION CODES THIS PROGRAM CALCULATE CAR FOR OBSERVATION,
PRECAR AND POSTCAR OVER A SPECIFIED WINDOW, AND MEAN OF CAR GROUPED
BY EVENT TYPE AND COMPOUNDED RATIO Sub Calculate_CAR() 'This sub
calculate CARs for each observation for the specified window. Dim
window As Integer 'Event window window = 10 Dim totalRows As
Integer Dim arrSymbol() As String Dim arrDate() As String Dim
arrAbnormalReturn() As Double Dim arrFinancialStatement() As Double
Dim arrRights() As Double Dim posNoFiEvent As Integer Dim
negNoFiEvent As Integer Dim noRightEvent As Integer noRightEvent =
0 posNoFiEvent = 0 negNoFiEvent = 0 Dim indexPosF() As Integer '
read when (position) the event happen Dim indexNegF() As
Integer
- 52. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 48 Dim indexRightEvent() As Integer
' Read basic Data Sheets("Data").Select Cells(4, 1).Select
totalRows = Range(Selection, Selection.End(xlDown)).count 'MsgBox
(totalRows) ReDim arrSymbol(totalRows) As String ReDim
arrDate(totalRows) As String ReDim arrAbnormalReturn(totalRows) As
Double ReDim arrFinancialStatement(totalRows) As Double ReDim
arrRights(totalRows) As Double 'read Data into these array Dim i As
Integer For i = 4 To totalRows arrSymbol(i) =
Worksheets("Data").Cells(i, 1) arrDate(i) =
Worksheets("Data").Cells(i, 2) arrAbnormalReturn(i) =
Worksheets("Data").Cells(i, 10) arrRights(i) =
Worksheets("Data").Cells(i, 17) arrFinancialStatement(i) =
Worksheets("Data").Cells(i, 18) 'count good/bad BCTC If
(arrFinancialStatement(i) = 1) Then posNoFiEvent = posNoFiEvent + 1
ElseIf (arrFinancialStatement(i) = -1) Then negNoFiEvent =
negNoFiEvent + 1 End If 'count Rights If (arrRights(i) 0) Then
noRightEvent = noRightEvent + 1 End If Next i 'MsgBox
(noRightEvent)
- 53. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 49 ReDim indexPosF(posNoFiEvent) As
Integer ReDim indexNegF(negNoFiEvent) As Integer ReDim
indexRightEvent(noRightEvent) As Integer Dim j, k, m As Integer j =
0 k = 0 m = 0 'get the position of event For i = 4 To totalRows If
(arrFinancialStatement(i) = 1) Then j = j + 1 indexPosF(j) = i
'position of event ElseIf (arrFinancialStatement(i) = -1) Then k =
k + 1 indexNegF(k) = i End If If (arrRights(i) 0) Then m = m + 1
indexRightEvent(m) = i End If Next i 'Calculate CAR based on
estimate window - including the announment day Dim PRECAR_FI_POS()
As Double Dim PRECAR_FI_NEG() As Double Dim PRECAR_RIGHTS() As
Double ReDim PRECAR_FI_POS(posNoFiEvent) As Double ReDim
PRECAR_FI_NEG(negNoFiEvent) As Double ReDim
PRECAR_RIGHTS(noRightEvent) As Double Dim POSTCAR_FI_POS() As
Double Dim POSTCAR_FI_NEG() As Double Dim POSTCAR_RIGHTS() As
Double
- 54. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 50 ReDim
POSTCAR_FI_POS(posNoFiEvent) As Double ReDim
POSTCAR_FI_NEG(negNoFiEvent) As Double ReDim
POSTCAR_RIGHTS(noRightEvent) As Double
Worksheets("Result").Cells(1, 1) = "POSITIVE FINANCIAL STATEMENT"
Worksheets("Result").Cells(2, 1) = "SYMBOL"
Worksheets("Result").Cells(2, 2) = "DATE"
Worksheets("Result").Cells(2, 3) = "PRECAR20"
Worksheets("Result").Cells(2, 4) = "POSTCAR20"
Worksheets("Result").Cells(2, 5) = "PRECAR30"
Worksheets("Result").Cells(2, 6) = "POSTCAR30"
Worksheets("Result").Cells(2, 7) = "PRECAR10"
Worksheets("Result").Cells(2, 8) = "POSTCAR10"
'Worksheets("Result").Cells(2, 9) = "PRECAR50"
'Worksheets("Result").Cells(2, 10) = "POSTCAR50"
Worksheets("Result").Cells(1, 12) = "NEGATIVE FINANCIAL STATEMENT"
Worksheets("Result").Cells(2, 12) = "SYMBOL"
Worksheets("Result").Cells(2, 13) = "DATE"
Worksheets("Result").Cells(2, 14) = "PRECAR20"
Worksheets("Result").Cells(2, 15) = "POSTCAR20"
Worksheets("Result").Cells(2, 16) = "PRECAR30"
Worksheets("Result").Cells(2, 17) = "POSTCAR30"
Worksheets("Result").Cells(2, 18) = "PRECAR10"
Worksheets("Result").Cells(2, 19) = "POSTCAR10"
'Worksheets("Result").Cells(2, 21) = "POSTCAR50"
Worksheets("Result").Cells(1, 23) = "RIGHTS EVENT"
Worksheets("Result").Cells(2, 23) = "SYMBOL"
Worksheets("Result").Cells(2, 24) = "DATE"
Worksheets("Result").Cells(2, 25) = "RATE"
Worksheets("Result").Cells(2, 26) = "PRECAR20"
Worksheets("Result").Cells(2, 27) = "POSTCAR20"
Worksheets("Result").Cells(2, 28) = "PRECAR30"
- 55. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 51 Worksheets("Result").Cells(2,
29) = "POSTCAR30" Worksheets("Result").Cells(2, 30) = "PRECAR10"
Worksheets("Result").Cells(2, 31) = "POSTCAR10"
'Worksheets("Result").Cells(2, 32) = "PRECAR50"
'Worksheets("Result").Cells(2, 33) = "POSTCAR50" Dim posStep As
Integer posStep = 2 'POSITIVE EARNING For i = 1 To posNoFiEvent '
go through number of event For j = 1 To window PRECAR_FI_POS(i) =
PRECAR_FI_POS(i) + arrAbnormalReturn(indexPosF(i) - j + 1)
POSTCAR_FI_POS(i) = POSTCAR_FI_POS(i) +
arrAbnormalReturn(indexPosF(i) + j) Next j 'writeback CAR to Data
sheet Worksheets("Data").Cells(indexPosF(i), 11) = PRECAR_FI_POS(i)
Worksheets("Data").Cells(indexPosF(i), 12) = POSTCAR_FI_POS(i)
'write CAR to result sheet posStep = posStep + 1
Worksheets("Result").Cells(posStep, 1) = arrSymbol(indexPosF(i))
Worksheets("Result").Cells(posStep, 2) = arrDate(indexPosF(i)) 'to
change when window change 'window 20
'Worksheets("Result").Cells(posStep, 3) = PRECAR_FI_POS(i)
'Worksheets("Result").Cells(posStep, 4) = POSTCAR_FI_POS(i) 'window
30 'Worksheets("Result").Cells(posStep, 5) = PRECAR_FI_POS(i)
'Worksheets("Result").Cells(posStep, 6) = POSTCAR_FI_POS(i) 'window
10
- 56. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 52
Worksheets("Result").Cells(posStep, 7) = PRECAR_FI_POS(i)
Worksheets("Result").Cells(posStep, 8) = POSTCAR_FI_POS(i) Next i
Dim negStep As Integer negStep = 2 'NEGATIVE EARNING For i = 1 To
negNoFiEvent ' go through event For j = 1 To window
PRECAR_FI_NEG(i) = PRECAR_FI_NEG(i) +
arrAbnormalReturn(indexNegF(i) - j + 1) POSTCAR_FI_NEG(i) =
POSTCAR_FI_NEG(i) + arrAbnormalReturn(indexNegF(i) + j) Next j
'write CAR to Data sheet Worksheets("Data").Cells(indexNegF(i), 11)
= PRECAR_FI_NEG(i) Worksheets("Data").Cells(indexNegF(i), 12) =
POSTCAR_FI_NEG(i) 'write CAR to result sheet negStep = negStep + 1
Worksheets("Result").Cells(negStep, 12) = arrSymbol(indexNegF(i))
Worksheets("Result").Cells(negStep, 13) = arrDate(indexNegF(i)) 'to
change when window change 'window 20
'Worksheets("Result").Cells(negStep, 14) = PRECAR_FI_NEG(i)
'Worksheets("Result").Cells(negStep, 15) = POSTCAR_FI_NEG(i)
'window 30 'Worksheets("Result").Cells(negStep, 16) =
PRECAR_FI_NEG(i) 'Worksheets("Result").Cells(negStep, 17) =
POSTCAR_FI_NEG(i) 'window 10 Worksheets("Result").Cells(negStep,
18) = PRECAR_FI_NEG(i) Worksheets("Result").Cells(negStep, 19) =
POSTCAR_FI_NEG(i) Next i
- 57. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 53 Dim rightStep As Integer
rightStep = 2 'write Data to Result For i = 1 To noRightEvent ' go
through event For j = 1 To window PRECAR_RIGHTS(i) =
PRECAR_RIGHTS(i) + arrAbnormalReturn(indexRightEvent(i) - j + 1)
POSTCAR_RIGHTS(i) = POSTCAR_RIGHTS(i) +
arrAbnormalReturn(indexRightEvent(i) + j) Next j
Worksheets("Data").Cells(indexRightEvent(i), 11) = PRECAR_RIGHTS(i)
Worksheets("Data").Cells(indexRightEvent(i), 12) =
POSTCAR_RIGHTS(i) rightStep = rightStep + 1
Worksheets("Result").Cells(rightStep, 23) =
arrSymbol(indexRightEvent(i)) Worksheets("Result").Cells(rightStep,
24) = arrDate(indexRightEvent(i))
Worksheets("Result").Cells(rightStep, 25) =
arrRights(indexRightEvent(i)) 'window 20
'Worksheets("Result").Cells(rightStep, 26) = PRECAR_RIGHTS(i)
'Worksheets("Result").Cells(rightStep, 27) = POSTCAR_RIGHTS(i)
'window 30 'Worksheets("Result").Cells(rightStep, 28) =
PRECAR_RIGHTS(i) 'Worksheets("Result").Cells(rightStep, 29) =
POSTCAR_RIGHTS(i) 'window 10 Worksheets("Result").Cells(rightStep,
30) = PRECAR_RIGHTS(i) Worksheets("Result").Cells(rightStep, 31) =
POSTCAR_RIGHTS(i) Next i MsgBox ("finish processing data") End
Sub
- 58. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 54 '~~~~~~~~~~~~~~~~~~~~~~ handle
continuous CAR ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Sub
Calculate_PRECAR_POSTCAR() 'This sub calculate mean of PRECAR and
POSTCAR seperately for each event type 'parameter: event window Dim
window As Integer window = 30 Dim posPreMean() As Double Dim
posPostMean() As Double Dim negPreMean() As Double Dim
negPostMean() As Double Dim rightPreMean() As Double Dim
rightPostMean() As Double ReDim posPreMean(window) As Double ReDim
posPostMean(window) As Double ReDim negPreMean(window) As Double
ReDim negPostMean(window) As Double ReDim rightPreMean(window) As
Double ReDim rightPostMean(window) As Double Dim totalRows As
Integer Dim arrSymbol() As String Dim arrDate() As String Dim
arrAbnormalReturn() As Double Dim arrFinancialStatement() As Double
Dim arrRights() As Double Dim posNoFiEvent As Integer Dim
negNoFiEvent As Integer Dim noRightEvent As Integer noRightEvent =
0 posNoFiEvent = 0 negNoFiEvent = 0
- 59. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 55 Dim indexPosF() As Integer '
read when (position) the event happen Dim indexNegF() As Integer
Dim indexRightEvent() As Integer ' Read basic Data
Sheets("Data").Select Cells(4, 1).Select totalRows =
Range(Selection, Selection.End(xlDown)).count 'MsgBox (totalRows)
ReDim arrSymbol(totalRows) As String ReDim arrDate(totalRows) As
String ReDim arrAbnormalReturn(totalRows) As Double ReDim
arrFinancialStatement(totalRows) As Double ReDim
arrRights(totalRows) As Double 'read Data into these array Dim i As
Integer For i = 4 To totalRows arrSymbol(i) =
Worksheets("Data").Cells(i, 1) arrDate(i) =
Worksheets("Data").Cells(i, 2) arrAbnormalReturn(i) =
Worksheets("Data").Cells(i, 10) arrRights(i) =
Worksheets("Data").Cells(i, 17) arrFinancialStatement(i) =
Worksheets("Data").Cells(i, 18) 'count good/bad BCTC If
(arrFinancialStatement(i) = 1) Then posNoFiEvent = posNoFiEvent + 1
ElseIf (arrFinancialStatement(i) = -1) Then negNoFiEvent =
negNoFiEvent + 1 End If 'count Rights If (arrRights(i) 0) Then
noRightEvent = noRightEvent + 1
- 60. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 56 End If Next i 'MsgBox
(noRightEvent) ReDim indexPosF(posNoFiEvent) As Integer ReDim
indexNegF(negNoFiEvent) As Integer ReDim
indexRightEvent(noRightEvent) As Integer Dim j, k, m As Integer j =
0 k = 0 m = 0 'get the position of event For i = 4 To totalRows If
(arrFinancialStatement(i) = 1) Then j = j + 1 indexPosF(j) = i
'position of event ElseIf (arrFinancialStatement(i) = -1) Then k =
k + 1 indexNegF(k) = i End If If (arrRights(i) 0) Then m = m + 1
indexRightEvent(m) = i End If Next i 'Calculate CAR based on
estimate window - including the announment day Dim PRECAR_FI_POS()
As Double Dim PRECAR_FI_NEG() As Double Dim PRECAR_RIGHTS() As
Double
- 61. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 57 ReDim
PRECAR_FI_POS(posNoFiEvent) As Double ReDim
PRECAR_FI_NEG(negNoFiEvent) As Double ReDim
PRECAR_RIGHTS(noRightEvent) As Double Dim POSTCAR_FI_POS() As
Double Dim POSTCAR_FI_NEG() As Double Dim POSTCAR_RIGHTS() As
Double ReDim POSTCAR_FI_POS(posNoFiEvent) As Double ReDim
POSTCAR_FI_NEG(negNoFiEvent) As Double ReDim
POSTCAR_RIGHTS(noRightEvent) As Double Dim count As Integer count =
1 Dim totalPositive As Double Dim totalNegative As Double Dim
totalRight As Double totalPositive = 0 totalNegative = 0 totalRight
= 0 Dim PostPosMean As Double Dim PostNegMean As Double Dim
PostRightMean As Double Worksheets("Result2").Cells(count, 1) =
"WINDOW" Worksheets("Result2").Cells(count, 2) = "PF MEAN"
Worksheets("Result2").Cells(count, 3) = "NF MEAN"
Worksheets("Result2").Cells(count, 4) = "RIGHT MEAN"
'~~~~~~~~~~~~~~~~PRE CAR~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ For j =
window To 0 Step -1 'POSITIVE
- 62. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 58 For i = 1 To posNoFiEvent ' go
through number of event 'PRECAR_FI_POS(i) = PRECAR_FI_POS(i) +
arrAbnormalReturn(indexPosF(i) - j + 1) posPreMean(j) =
posPreMean(j) + arrAbnormalReturn(indexPosF(i) - j) Next i '
Calculate Mean totalPositive = totalPositive + posPreMean(j) '
totalPositive = totalPositive / posNoFiEvent 'NEGATIVE For i = 1 To
negNoFiEvent ' go through number of event negPreMean(j) =
negPreMean(j) + arrAbnormalReturn(indexNegF(i) - j) Next i '
Calculate Mean totalNegative = totalNegative + negPreMean(j) '
totalNegative = totalNegative / negNoFiEvent 'RIGHTS For i = 1 To
noRightEvent ' go through number of event rightPreMean(j) =
rightPreMean(j) + arrAbnormalReturn(indexRightEvent(i) - j) Next i
' Calculate Mean totalRight = totalRight + rightPreMean(j) '
totalRight = totalRight / noRightEvent 'write MEAN to result2 sheet
count = count + 1 Worksheets("Result2").Cells(count, 1) = -j
Worksheets("Result2").Cells(count, 2) = totalPositive /
posNoFiEvent Worksheets("Result2").Cells(count, 3) = totalNegative
/ negNoFiEvent Worksheets("Result2").Cells(count, 4) = totalRight /
noRightEvent Next j
- 63. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 59 'get CAR from PRE 'PostPosMean =
totalPositive 'PostNegMean = 0 'PostRightMean = 0
'~~~~~~~~~~~~~~~~POST CAR~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ For j = 1
To window 'POSITIVE For i = 1 To posNoFiEvent ' go through number
of event posPreMean(j) = posPreMean(j) +
arrAbnormalReturn(indexPosF(i) + j) Next i ' Calculate Mean
totalPositive = totalPositive + posPreMean(j) 'NEGATIVE For i = 1
To negNoFiEvent ' go through number of event negPreMean(j) =
negPreMean(j) + arrAbnormalReturn(indexNegF(i) + j) Next i '
Calculate Mean totalNegative = totalNegative + negPreMean(j)
'RIGHTS For i = 1 To noRightEvent ' go through number of event
rightPreMean(j) = rightPreMean(j) +
arrAbnormalReturn(indexRightEvent(i) + j) Next i ' Calculate Mean
totalRight = totalRight + rightPreMean(j) 'write MEAN to result2
sheet count = count + 1 Worksheets("Result2").Cells(count, 1) = j
Worksheets("Result2").Cells(count, 2) = totalPositive /
posNoFiEvent Worksheets("Result2").Cells(count, 3) = totalNegative
/ negNoFiEvent
- 64. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 60
Worksheets("Result2").Cells(count, 4) = totalRight / noRightEvent
Next j MsgBox ("finish processing data") End Sub Sub
Calculate_Mean_CAR() 'This sub calculate mean CAR from -30 to 30
days for all three event type Dim window As Integer window = 30 Dim
posPreMean() As Double Dim posPostMean() As Double Dim negPreMean()
As Double Dim negPostMean() As Double Dim rightPreMean() As Double
Dim rightPostMean() As Double ReDim posPreMean(window) As Double
ReDim posPostMean(window) As Double ReDim negPreMean(window) As
Double ReDim negPostMean(window) As Double ReDim
rightPreMean(window) As Double ReDim rightPostMean(window) As
Double Dim totalRows As Integer Dim arrSymbol() As String Dim
arrDate() As String Dim arrAbnormalReturn() As Double Dim
arrFinancialStatement() As Double Dim arrRights() As Double
- 65. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 61 Dim posNoFiEvent As Integer Dim
negNoFiEvent As Integer Dim noRightEvent As Integer noRightEvent =
0 posNoFiEvent = 0 negNoFiEvent = 0 Dim indexPosF() As Integer '
read when (position) the event happen Dim indexNegF() As Integer
Dim indexRightEvent() As Integer ' Read basic Data
Sheets("Data").Select Cells(4, 1).Select totalRows =
Range(Selection, Selection.End(xlDown)).count 'MsgBox (totalRows)
ReDim arrSymbol(totalRows) As String ReDim arrDate(totalRows) As
String ReDim arrAbnormalReturn(totalRows) As Double ReDim
arrFinancialStatement(totalRows) As Double ReDim
arrRights(totalRows) As Double 'read Data into these array Dim i As
Integer For i = 4 To totalRows arrSymbol(i) =
Worksheets("Data").Cells(i, 1) arrDate(i) =
Worksheets("Data").Cells(i, 2) arrAbnormalReturn(i) =
Worksheets("Data").Cells(i, 10) arrRights(i) =
Worksheets("Data").Cells(i, 17) arrFinancialStatement(i) =
Worksheets("Data").Cells(i, 18) 'count good/bad BCTC If
(arrFinancialStatement(i) = 1) Then posNoFiEvent = posNoFiEvent +
1
- 66. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 62 ElseIf (arrFinancialStatement(i)
= -1) Then negNoFiEvent = negNoFiEvent + 1 End If 'count Rights If
(arrRights(i) 0) Then noRightEvent = noRightEvent + 1 End If Next i
'MsgBox (noRightEvent) ReDim indexPosF(posNoFiEvent) As Integer
ReDim indexNegF(negNoFiEvent) As Integer ReDim
indexRightEvent(noRightEvent) As Integer Dim j, k, m As Integer j =
0 k = 0 m = 0 'get the position of event For i = 4 To totalRows If
(arrFinancialStatement(i) = 1) Then j = j + 1 indexPosF(j) = i
'position of event ElseIf (arrFinancialStatement(i) = -1) Then k =
k + 1 indexNegF(k) = i End If If (arrRights(i) 0) Then m = m + 1
indexRightEvent(m) = i End If
- 67. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 63 Next i 'Calculate CAR based on
estimate window - including the announment day Dim PRECAR_FI_POS()
As Double Dim PRECAR_FI_NEG() As Double Dim PRECAR_RIGHTS() As
Double ReDim PRECAR_FI_POS(posNoFiEvent) As Double ReDim
PRECAR_FI_NEG(negNoFiEvent) As Double ReDim
PRECAR_RIGHTS(noRightEvent) As Double Dim POSTCAR_FI_POS() As
Double Dim POSTCAR_FI_NEG() As Double Dim POSTCAR_RIGHTS() As
Double ReDim POSTCAR_FI_POS(posNoFiEvent) As Double ReDim
POSTCAR_FI_NEG(negNoFiEvent) As Double ReDim
POSTCAR_RIGHTS(noRightEvent) As Double Dim count As Integer count =
1 Dim totalPositivePre As Double Dim totalNegativePre As Double Dim
totalRightPre As Double totalPositivePre = 0 totalNegativePre = 0
totalRightPre = 0 Dim totalPositivePost As Double Dim
totalNegativePost As Double Dim totalRightPost As Double
totalPositivePost = 0 totalNegativePost = 0 totalRightPost = 0
Worksheets("Result3").Cells(count, 1) = "WINDOW"
Worksheets("Result3").Cells(count, 2) = "PF MEAN"
- 68. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 64
Worksheets("Result3").Cells(count, 3) = "NF MEAN"
Worksheets("Result3").Cells(count, 4) = "RIGHT MEAN"
'~~~~~~~~~~~~~~~~PRE CAR~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ For j =
window To 0 Step -1 'POSITIVE For i = 1 To posNoFiEvent ' go
through number of event 'PRECAR_FI_POS(i) = PRECAR_FI_POS(i) +
arrAbnormalReturn(indexPosF(i) - j + 1) posPreMean(j) =
posPreMean(j) + arrAbnormalReturn(indexPosF(i) - j) Next i '
Calculate Mean totalPositivePre = totalPositivePre + posPreMean(j)
' totalPositivePre = totalPositivePre / posNoFiEvent 'NEGATIVE For
i = 1 To negNoFiEvent ' go through number of event negPreMean(j) =
negPreMean(j) + arrAbnormalReturn(indexNegF(i) - j) Next i '
Calculate Mean totalNegativePre = totalNegativePre + negPreMean(j)
' totalNegativePre = totalNegativePre / negNoFiEvent 'RIGHTS For i
= 1 To noRightEvent ' go through number of event rightPreMean(j) =
rightPreMean(j) + arrAbnormalReturn(indexRightEvent(i) - j) Next i
' Calculate Mean totalRightPre = totalRightPre + rightPreMean(j) '
totalRightPre = totalRightPre / noRightEvent 'write MEAN to Result3
sheet count = count + 1
- 69. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 65
Worksheets("Result3").Cells(count, 1) = -j
Worksheets("Result3").Cells(count, 2) = totalPositivePre /
posNoFiEvent Worksheets("Result3").Cells(count, 3) =
totalNegativePre / negNoFiEvent Worksheets("Result3").Cells(count,
4) = totalRightPre / noRightEvent Next j 'get CAR from PRE
'PostPosMean = totalPositivePre 'PostNegMean = 0 'PostRightMean = 0
'~~~~~~~~~~~~~~~~POST CAR~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ For j = 1
To window 'POSITIVE For i = 1 To posNoFiEvent ' go through number
of event posPreMean(j) = posPreMean(j) +
arrAbnormalReturn(indexPosF(i) + j) Next i ' Calculate Mean
totalPositivePost = totalPositivePost + posPreMean(j) 'NEGATIVE For
i = 1 To negNoFiEvent ' go through number of event negPreMean(j) =
negPreMean(j) + arrAbnormalReturn(indexNegF(i) + j) Next i '
Calculate Mean totalNegativePost = totalNegativePost +
negPreMean(j) 'RIGHTS For i = 1 To noRightEvent ' go through number
of event rightPreMean(j) = rightPreMean(j) +
arrAbnormalReturn(indexRightEvent(i) + j) Next i ' Calculate Mean
totalRightPost = totalRightPost + rightPreMean(j)
- 70. APPENDIX II Vietnam Stock Market: How Stock Returns
Response to Event Announcements 66 'write MEAN to Result3 sheet
count = count + 1 Worksheets("Result3").Cells(count, 1) = j
Worksheets("Result3").Cells(count, 2) = totalPositivePost /
posNoFiEvent Worksheets("Result3").Cells(count, 3) =
totalNegativePost / negNoFiEvent Worksheets("Result3").Cells(count,
4) = totalRightPost / noRightEvent Next j MsgBox ("finish
processing data") End Sub
- 71. APPENDIX III Vietnam Stock Market: How Stock Returns
Response to Event Announcements 67 APPENDIX III REFERENCES 1. John
Y. Campbell/Andrew W. Lo/A. Craig MacKinlay, 1997, The econometrics
of Financial Markets, Princeton University Press, Princeton, New
Jersey 2. Cheng-Few Lee, Alice C.Lee, 2006, Encyclopedia of
Finance, Springer Science - Business Media, Inc
http://books.google.com.vn/books?id=I6BH-
RKYVG4C&printsec=frontcover&dq=Encyclopedia+of+Finance&hl=vi&ei=qyw
sTMzYNYP-
8AaVoIGfDg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCcQ6AEw
AA#v=onepage&q&f=false 3. Beta were collected from
Bloomberg on 30th March, 2010 www.bloomberg.com/ 4. Stock prices
and VN-index were collected from Hochiminh Stock Exchange
www.hsx.vn 5. B. Espen Eckbo, 2007, Handbook of Corporate Finance,
North-Holland
http://books.google.com.vn/books?id=p7HcvlIAgdkC&printsec=frontcover#v=on
epage&q&f=false 6. Donald Getz, Event Studies. Theory,
Research and policy for plannes events, 2007,
Butterworth-Heinemann
- 72. APPENDIX III Vietnam Stock Market: How Stock Returns
Response to Event Announcements 68
http://books.google.com.vn/books?id=g6uwI-
19chMC&printsec=frontcover&dq=event+studies&hl=vi&ei=7xcoTKbrH4OB8g
aSoKzfDw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCwQ6AEwA
A#v=onepage&q&f=false 7. George M. Frankfuter and Bob G.
Wood with James Wansley, 2003, Dividend Policy Theory and Practice,
Elsevier Science
http://books.google.com.vn/books?id=9G6H70WdBFoC&pg=PA97&dq=dividen
d+hypothesis&hl=vi&ei=vGMoTN6qJMmRnweQwYSpAQ&sa=X&oi=book_res
ult&ct=result&resnum=1&ved=0CCcQ6AEwAA#v=snippet&q=%22dividend%2
0hypothesis%22&f=false 8. A. Mitchell Polinsky, Steven Shavell,
Handbook of law and economics
http://books.google.com.vn/books?id=ibCgJjch1lAC&pg=PA947&dq=%22event
+studies%22&hl=vi&ei=uQQqTJz1K9S_rAfmueV0&sa=X&oi=book_result&ct=
result&resnum=4&ved=0CDcQ6AEwAw#v=onepage&q&f=false