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- Title
The effects of free trade agreements on the stock market: Evidence from Vietnam.
- Authors
Pham, Huy; Mudalige, Priyantha; Le, Hanh; Bui, Mai; Nguyen, Van; Ramiah, Vikash; Chu, Tuan; Vu, Tuan Hung
- Abstract
This study examines the effects of news events related to the European Union-Vietnam Free Trade Agreement (EVFTA) on the Vietnam stock market from 2010 to 2020. We calculate sectoral abnormal returns prior to, during, and after announcements and find that the Vietnamese stock market is susceptible to these events. We discovered that the announcement had a negative impact on the market, which might diminish the effectiveness of the Agreement. The findings show that more than half of Vietnam's sectors had an immediate reaction to EVFTA announcements, with fourteen reacting negatively and six responding positively. Two of the ten events did not have any immediate impact on these industries but all events resulted in either early or delayed reactions. We also find market scepticism and major changes in the deal led to the emergence of a diamond risk structure. We run multiple robustness tests to account for market integration and other factors that may affect stock returns. In addition, we explore potential sectoral systematic risk changes following these occurrences using different ARCH-type models. These additional tests confirm the robustness of our findings.
- Subjects
VIETNAM; COMMERCIAL treaties; FREE trade; MARKETING agreements; STOCKS (Finance); EUROPEAN Union; RATE of return on stocks; DIAMONDS
- Publication
PLoS ONE, 2024, Vol 19, Issue 2, p1
- ISSN
1932-6203
- Publication type
Article
- DOI
10.1371/journal.pone.0294456