Open AccessNOISE TRADER RISK: EVIDENCE FROM VIETNAM STOCK MARKET
Author(s) -
Phan Khoa Cuong,
Trần Thị Bích Ngọc,
Bui Thanh Cong,
Vo Thi Quynh Chau
Publication year - 2019
Publication title -
kinh tế và phát triển/nông nghiệp và nông thôn
Language(s) - English
Resource type - Journals
eISSN - 2588-1191
pISSN - 2588-1205
DOI - 10.26459/hueuni-jed.v128i5c.5083
Subject(s) - stock (firearms) , stock market , financial economics , econometrics , economics , autoregressive conditional heteroskedasticity , business , monetary economics , volatility (finance) , geography , context (archaeology) , archaeology
This paper investigates the existence of noise trader risk in Vietnam’s stock market and its effect on the daily returns of stock prices. The methodologies contain the estimation of GARCH (1,1) model to filter the residuals using the moving average method to calculate the impact of information traders. Noise trader risk or the risk that is caused by noise traders is derived by subtracting the residuals by the rational traders’ impact. We find that the noise trader risk does exist in Vietnam’s stock market and its impact on daily returns of stocks is unpredictable. Meanwhile, we find a positive impact of information traders on the stock returns. It increases the daily stock returns, and in turn, helps the market to correct itself because the stock prices move back to its fundamental value.Keywords: noise trader risk, GARCH (1,1), Vietnam’s stock market