VIETNAM NATIONAL UNIVERSITY – HO CHI MINH CITY

INTERNATIONAL UNIVERSITY

SCHOOL OF BUSINESS

SEASONALITY EFFECT IN VIETNAM’S

STOCK EXCHANGE FROM 2007 TO 2015

A STUDY ON HO CHI MINH STOCK EXCHANGE (HOSE)

In Partial Fulfillment of the Requirements of the Degree of

BACHELOR OF ARTS in FINANCE AND BANKING

STUDENT’S NAME: NGUYEN MINH AN (BAFNIU13257)

ADVISOR: NGUYEN KIM THU, PHD

Ho Chi Minh City, Vietnam

2017
 SEASONAL EFFECT ON VIETNAM STOCK
EXCHANGE FROM 2007 TO 2015
A STUDY ON HO CHI MINH STOCK EXCHANGE (HOSE)

APPROVED BY: Advisor APPROVED BY: Committee,

_________________________ _________________________

Dr. Nguyen Kim Thu Name, Title

_________________________

Name, Title

_________________________

Name, Title

_________________________

Name, Title

THESIS COMMITTEE

ii
ACKNOWLEDGEMENT
First and foremost, I would like to send to my advisor, Dr. Thu, a big sincere thank
from the bottom of my heart. She is always there to support me during my thesis crisis
and without any of her help, I would not have gone this far in this journey
Secondly, my family, especially my mom takes an undeniably crucial part in my heart.
I am blessed to have my mom who always stands beside to tell me the right thing to do
and I am happy to have my sister who is understanding and caring for her little brother.
I would become nothing without them
Thirdly, I would like to give credits to Ms. Tran Thanh Truc - alumni of IU, for her
encouragement and patience of sitting for hours to explain econometrics terms and
problems for me. Her help definitely contributes a large part in doing this thesis. Also,
my finance team from junior year also plays a big part in supporting and backing me
up every time I face difficulties. They are the source of fun that I can hardly forget after
graduation
Last but not least, I want to send to my best friend, Mr. Long, a big hug for a deepest
thank from my heart. He is like my family to me. He has always been a funny,
encouraging friend to me and I cherish every single moment that I have him in my life.

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TABLE OF CONTENT
ACKNOWLEDGEMENT!.....................................................................................................!iii!
LIST OF TABLES!................................................................................................................!vii!
LIST OF FIGURES!..............................................................................................................!vii!
ABSTRACT!..........................................................................................................................!viii!
CHAPTER 1!............................................................................................................................!1!
1.1 Background of the study!...............................................................................................!1!
1.1.1 Overview of vietnam’s stock market!........................................................................!3!
1.2 Research gap!..................................................................................................................!4!
1.3 Research aims and objectives!.......................................................................................!4!
1.4 Research questions!........................................................................................................!4!
1.5 Scope and Limitations!...................................................................................................!5!
1.6 Outline!............................................................................................................................!5!
CHAPTER 2!............................................................................................................................!6!
2.1 Behavioural finance!.......................................................................................................!6!
2.2 Behavioral trends!..........................................................................................................!6!
2.3 Market efficiency!...........................................................................................................!8!
2.4 Random walk theory!.....................................................................................................!9!
2.5 The efficient market hypothesis!...................................................................................!9!
2.6 Seasonality effect on stock market!.............................................................................!11!
2.6.1 Day of the week effect!............................................................................................!11!
2.6.2 Month of the year effect!........................................................................................!14!
2.7 Other anomalies!...........................................................................................................!16!
2.7.1 Accounting information anomaly!.........................................................................!16!
2.8 Tax loss selling theory!.................................................................................................!19!
CHAPTER 3!..........................................................................................................................!20!
3.1 Data collection!.............................................................................................................!20!
3.2 Research methodology!................................................................................................!20!
3.2.1 The day of the week regression model!..................................................................!20!
3.2.2 The month of the year regression model!...............................................................!21!

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 3.3! Model specification!................................................................................................!21!
3.3.1 Diagnostic tests!......................................................................................................!21!
3.3.1.1 Stationary tests!................................................................................................!22!
3.3.1.2 Heteroskedasticity!...........................................................................................!23!
3.3.1.3 Autocorrelation!................................................................................................!23!
3.3.2 Autoregressive Conditional Heteroskedasticity model (ARCH)!...........................!24!
3.3.3 Generalized ARCH (GARCH)!...............................................................................!25!
CHAPTER 4!..........................................................................................................................!27!
4.1 Day of the week effect!.................................................................................................!27!
4.1.1 GARCH method!.....................................................................................................!27!
4.1.2 Descriptive statistics!...............................................................................................!28!
4.2 Month of the year effect!..............................................................................................!29!
4.2.1 GARCH method!.....................................................................................................!29!
4.2.2 Descriptive statistics!...............................................................................................!30!
CHAPTER 5!..........................................................................................................................!31!
APPENDICES!.......................................................................................................................!31!
REFERENCES!......................................................................................................................!35!

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ABBREVIATION
EMH: Efficient market hypothesis
HOSE: Ho Chi Minh stock exchange
REE: Refrigeration Electrical Engineering Corporation
SAM: SAM Holdings Corporation
ETFs: Exchange-traded funds
CAPM: Capital Asset Pricing Model
P/E: Price/Earning
B/M: Book/Market
ARCH: Autoregressive Conditional Heteroskedasticity
GARCH: Generalized Autoregressive Conditional Heteroskedasticity
OLS: Ordinary Least Square
DOTW: Day of the week
MOTY: Month of the year

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LIST OF TABLES
Table 1: Stationary test…………………………………………………….32
Table 2: Heteroskedasticity test……………………………………………32
Table 3: Autocorrelation test………………………………………………33
Table 4: Normality test…………………………………………………….33
Table 5: GARCH for DOTW effect……………………………………….27
Table 6: Descriptive statistics for DOTW…………………………………28
Table 7: GARCH for MOTY effect……………………………………….29
Table 8: Descriptive statistics for MOTY………………………………....30

LIST OF FIGURES
Figure 1: Normal Distribution graph………………………………………34
Figure 2: Market capitalization as percentage of GDP……………………34

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ABSTRACT
This paper aims to investigate the day of the week and month of the year effect on
Vietnam's stock exchange, particularly on the Ho Chi Minh stock exchange (HOSE).
Overall, Vietnam's stock market is still relatively young compared to the other markets.
However, the recent years have shown a significant growth of the market. Still, the
market can be inefficient and full of errors, hence there are plenty of "opportunity
seekers" in the market that try to buy low and sell high. There are total 2240
observations with the time period ranging from 2007 to 2015 with two main methods
conducted are descriptive statistics and GARCH (1,1) model.

viii
CHAPTER 1
INTRODUCTION

This chapter gives out the basic research information and background of the study
within this thesis. Firstly, a brief summary of the current situation of Vietnam’s stock
market is introduced and linked with the research questions and the research purpose.
Secondly, the research gap and scope of research will be determined. The chapter ends
with the outline of the thesis.

1.1 Background of the study

It can be said that economy growth spurt has certain influence on the future of every
enterprise, both domestic and foreign, within a nation; in fact, it is the foreshadowing
of a rise or fall in performance of industries. Similarly, since the period of Doi Moi in
the 1990s, the economy growth spurt of Viet Nam has signaled a better future for
companies and corporations alike, as the national GDP skyrocketed with annual
average rate of 6.5%. However, during the course from 2008 and 2009, this foundation
for a promising future was gradually shaken, due to the international economy crisis,
causing a great fall in GDP growth rate (6.2%), even reaching the ceiling point (3.14%)
at the end of the year 2009. Despite many difficulties, Viet Nam market and economy
has, since then, made a recovery with promising signs: GDP growth rate, though
fluctuating at some point, increases gradually, reaching 6.5% at 2016; macroeconomic
balance, recovery of agriculture, re-construction of industry and investment-friendly
environment can be seen over the countries, especially in metropolitan ones, giving rise
to the speculation that growth rate will reach 6.3% at the end of 2015. All in all, over
the course of 25 years, beginning with the period of Doi Moi, Viet Nam has
accumulated different achievements in many fields, all of which indicates great growth
rate of economy. In fact, considering Viet Nam was one of underdog in nearly 200
countries, it is actually astonishing to some degree on its intensive development, with
just economy and political reform in 1986. In fact, the potential displayed over time has

1
been recorded down with not just mere words, but with remarkable performance in
GDP growth. Such performance is usually followed with rise in domestic stock
exchange (Gevit Duca, 2007). Indeed, it has been reported that domestic stock
exchanges in Viet Nam, such as HOSE, have increase significantly since establishment
in 2000.
During the course, not only the efficiency but also error in the growth of stock market
is taken into consideration to determine if the market truly follows the principle of
efficient market hypothesis. This hypothesis suggests the market is efficient, and
depending on the degree of efficiency, price might reflect public information, even
private one if it is extremely efficient, which make inside trading unprofitable.
However, if the market was not efficient enough, it is equivalent to providing loop holes
and advantageous chances for investors. Therefore, it is extremely important to examine
the efficiency of market, in order to preventing individuals from gaining abnormal
returns. Regarding this matter, Viet Nam stock market can be stated as a novice player,
so there exist uncertainty in the mechanism of the market, whether the same rule
applicable in other stock markets could be applied in Viet Nam. Even more concerning,
anomalies vary greatly; one of the most common are seasonal effect, or calendar effect,
which is divided into day-of-the-week effect, semi-month effect and January effect.
Naturally, the effect is derived from behavioral system of human, however, it poses
certain impact on value of the stock, though ephemerally.
The market is, indeed, giving positive growth signal, however, anomalies should be
dealt with to secure improvement and better understanding on the market as well as
investors' thinking. Moreover, due to the fact that Viet Nam stock market is quite new,
analogically speaking, a child in a world of experienced adults, the application of
efficient market hypothesis is still questionable. In fact, not just specifically in Viet
Nam, but also generally across Asia, the information mechanism is quite transparent
and not clear, sometimes the publication of information might be tricky, making the
decision harder for investors to make and for academician to understand the underlying
factors affecting the process. Under these conditions, this thesis attempts to find out if
market efficient anomalies in Viet Nam stock market is, in fact, contradict the market

2
efficient hypothesis, and if any forms of seasonal effect have any influence on Viet
Nam stock market.

1.1.1 Overview of vietnam’s stock market

During the period between 2000 to 2012, Viet Nam stock market has truly shown the
characteristics of a booming market. Admittedly, the market was not competitive and
resourceful as it is today due to the lack of merchandise and IPOs of renown firms in
the first five years. It is, however, a different story from the course of 2006 to the present
day. The country, through the adoption of new policy of offering cross-country
investment, has attracted not just domestic investors but international ones. In fact,
these extended investors from foreign countries add a layer of support to the stock
market, which, in time, attract more foreign capital. As such, it is certain to claim that
the course of time from 2006 to the present is the intense growth spurt of securities
market, with the construction of various financial tools and advantageous policy. Thus,
it has become an investor-attraction worldwide, allowing an increase in foreign
portfolio equity flow to the country. In fact, ownership of foreign investors has shown
an increase from 2007 to 2008, then a slight reduction in 2009 but eventually rising at
the same pace to 2012. More certainly, EPFR Global, the internationally research
company, has publicized its findings on February 22nd of 2012, that in that following
year, Viet Nam has received $32.3 million- three times higher than Malaysia, equivalent
capital flow $12.2 million- providing further support for the uprising equity flow in
Viet Nam.
HOSE stands for Ho Chi Minh Stock Exchange, and it was operated on July 20th, 2000
and the first trading day occurred in eight days later. Started with 2 stocks REE and
SAM and after nearly 17 years of operation, HOSE has operated with diversified tools
for investment such as corporate bonds, Exchange-traded funds (ETFs)... The total
capital inflows have accumulated over 253 trillion VND through stock auctions and
shares issuance to expand the business. The trading volume has also increased mildly
from 1.4 billion per day in 2000 to 600 trillion per day. In the year 2015, the global
economy was more volatile, especially, the recent fall in China stock market and the
depreciation of the Chinese Yuan led to a withdrawal effect and the sharp decline of

3
many major stock markets. However, Vietnam stock market has grown significantly
6.4% compared to the end of 2015 according to the VN-INDEX indicator. Foreigners
see Vietnam's stock market as a very promising market, which is shown by the trading
volume of foreign investors accompanied for 14% of total trading volume in the market.
Therefore, those contribute to a large part of investment opportunities in this type of
market

1.2 Research gap

There are many research papers in efficient market hypothesis conducted around the
world, including Vietnam stock exchanges. Chung Tien Luu (2016) propose a research
on seasonality effect on Vietnamese market using hypothesis testing method. However,
there exists a few research in Vietnam that illustrate a significant effect of the seasonal
anomaly. Moreover, the GARCH model is applied in this paper, which has never been
used in Vietnamese stock market. This method is the most efficient method, especially
for time series data because it includes the autocorrelation and heteroskedasticity factor
in the model.

1.3 Research aims and objectives

The aim of this research is to investigate whether there is a significant effect of
seasonality effects to the Vietnamese stock markets in recent years. This paper aims to
investigate whether there is any significant difference in return during the months of
the year. Furthermore, a test for day of the week effect is conducted to see whether there
are any days in the week that yield better return for investors

1.4 Research questions

According to the research purpose, I propose 5 below questions that should be answered
in this paper

•! Does day of the week effect exist in HOSE? On what day specifically?
•! Are there any months that shows significant effect on HOSE?
•! Does the overall Vietnam stock market follow the EMH theory?

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1.5 Scope and Limitations
This paper aims to give an insight of the seasonal anomalies and whether it happens in
Vietnam’s stock exchange, especially in Ho Chi Minh stock exchange. The first
limitation of this dissertation paper is the objectivity in the result. There are several
methods that can be conducted for testing the seasonal effect such as hypothesis testing,
OLS regression... However, there are only two methods used in this paper. This can
reduce the objectivity of the research. Secondly, there is no official data published in
the market. As a result, the data in this paper is downloaded from a security company
website and hence it might leads to minor accuracy problem in the dataset. Finally, this
thesis only gives two out of many seasonal effects that happen and those effects should
also be tested in Vietnam's stock exchange.

1.6 Outline
The next section is the explanation of the literature of Behavioral Finance, Efficient
Market Hypothesis along with the Random Walk theory. Then there will be a discussion
of the anomalies that contradicts the EMH such as day of the week effect and month of
the year effect. After reviewing the literature, part three will mainly focus on the data
collection and the regression model. Before getting to the analysis of the regression
model, the regression model must be made efficient and hence there will be several
testing methods for time series data such as stationary, autocorrelation and
heteroscedasticity. Finally, descriptive statistics, the autoregressive (ARCH) and
generalized autoregressive (GARCH) are used to analyze the results of the paper.

5
CHAPTER 2
LITERATURE REVIEW

This chapter gives you a brief introduction about market efficiency that is supported by
the efficient market hypothesis following with the 3 states of firms. Market efficiency
is something that every stock markets are trying to achieve, but every market exists
market anomalies which totally goes against with the market efficiency. Market
anomalies derived from many causes, mainly from the seasonality effect such as
holiday effect, and the day of the week effect.

2.1 Behavioural finance

Behavioral finance is a new branch of finance, supplementing the modern theories of
finance with behavioral perspective in order to explain different anomalies. As such,
the hypothesis applies psychological and social factors partly accounting for impacts
on the stock market (Oehler, 2000, cited by Schlichting, 2008). Reilly and Brown
(2003) believe, in a similar fashion with Oehler, that behavioral finance involves
analyzing the different psychological characteristics of individuals, and how they play
a part in the decision-making of investors, analysts and portfolio managers.
In fact, according to Malke (1973, cited by Thomas, 2006/2007), humans are quite
likely to make decision on emotional whim rather than on logical reasoning. Thus, the
study of behavioral finance is also about the study of how emotion, uncertainty
characteristics and irrational thinking affect the minds of investor, and in what possible
manners. Hence, this hypothesis might reveal a connection between effectiveness and
market abnormalities, as to improve and avoid these mistakes in the decision-making
process (Schiller, 1989).

2.2 Behavioral trends

Behavioral trends affect the decision-making of investors, indeed, but the main question
remains: in what manners and forms it affects the decision. As a matter of fact, many

6
theoretical researchers have conducted studies to find out which patterns represent
behavioral trends. As a case in point, Rayo and Becker (2005) explores the further depth
of pressure patterns that can incur reward-punishment effect in the past as well as social
reference point effect. Another instance is the findings of Samuelson and Swinkels
(2006) on conditions of effect of setting optimum choices.
On the subject of behaviors, it is essential to learn the diagnostic game due to the fact
it allows individual to recognize biases. Though simple, it is one of the most important,
not only it provides basic understanding into human minds when making decisions, but
also, from there, it offers chance for self-improvement. The heuristic method is quite
simple and effective thumb rule on this matter. It attempts to explain the process of the
mind when making judgments on complex issues or on incomplete information in most
cases, though sometimes might lead to systematic errors or cognitive biases due to
specific conditions (Kahneman, cite by Parikh, 2009). In other words, if specific
conditions are present, behavioral biases are predictable, thus, irrational thinking is also
predictable. As a result, behavioral finance suggests a new framework to contemplate
the investors' irrational decisions and their causes.
Following the above-mentioned diagnostic methods and biases affairs, Shefrin (2002)
summarizes four statements into four trends, which provide guidance for clearer
identification on causing factors of biases, including representativeness,
overconfidence, emotion and perception, finally, conservatism and aversion to
uncertainty. The first, representativeness, occurs when judgments are made based on
biased patterns, while the second, overconfidence, is brought about when investors
think highly of their abilities, accuracy of their information, and their control over the
estimated future events; the third, consisting of emotion and perception, indicates the
lack of control over emotion and logic as well as misguidance in thought-processing
when making judgments; lastly, the forth prefers to the biases made by human
sentiments over the familiar, rather than its true characteristics.
Bodie, Kane and Marcus (2009) suggests another set of behavioral trends, divided into
four dimensions: framing, mental accounting, regret avoidance, and prospect theory.
The decisions are influenced by how options are provided and how each independent

7
investor takes risk to make a profit. Mental accounting is a special arrangement for
specific decisions, and help explain the rate of volatility in stock prices.
Statman (1997) makes his argurments that mental accounting is compatible with
irrational investment preferences. Simply put, this means that investors prefer to sell
more profitable stocks than to sell stock losses. Regret avoidance indicates that
investors tend to have regrets when they make wrong or bad decisions.
In addition, De Bondt and Thaler (1985) supports that such regret avoidance is
consistent with both size and B/M effects. In fact, firms with high B/M rates can
decrease stock prices. Taking mental accounting into account, if investors focus on
having more profit than overall portfolio, they can become more adventurous and more
attentive to recent poor performance. Prospective theory, on the other hand, focuses
more on investors with fair risk-adventurous characteristics. Higher prosperity brings
greater satisfaction, in turn, leading to higher risk-venture.
Moreover, Bodie, Kane, and Marcus (2009)'s point of view discuss the fact behavioral
trends are unrelated to stock price if rational arbitrageurs could fully exploit the
mistakes of behavioral investors.

2.3 Market efficiency

The first one who mentioned the market efficiency is Bachelier (1900) when he wrote
his Ph.D. thesis. When we mention about market efficiency, the random walk theory is
usually the first thing to come up. The first person who laid a foundation in the random
walk model is Maurice Kendall, when he originally examined 22 UK stocks and
commodity price series; he concluded that "in series of prices which are observed at
fairly close intervals the random changes from one term to the next are so large as to
swamp any systematic effect which may be present. The data behave almost like
wandering series". This simply means that the stock is basically running randomly, so
we cannot get the past data to predict the future trends. This finding is called random
walk theory, which is famous findings and it has been a theory background foundation
for many researches later on. Several tests were conducted on a large sample of stock
markets around the world to look for the efficiency of those markets.

8
2.4 Random walk theory
As previously discussed, random walk theory assumes that stock price can not be
predictable since it goes randomly in each trading day. The study of Fama (1970) on
the market efficient hypothesis built a fundamental basis of behavioral finance and the
paper confirmed the validity of the random walk theory. Later on there are some other
findings for different stock market around the world for the existence of the random
walk theory. The figure below shows the key findings of those papers
Authors Time period Market Methods Results
Barine January 2000 Nigerian Augmented- Random walk is
Michael – December stock Dickey Fuller not supported in
2012 exchange test Nigeria in this
period
Ankita 19 years National 3 different unit The results
Mishra, stock root tests with suggest that the
Vinod Mishra exchange and structural heteroskedasticity
and Russel Bombay breaks should be
Smyth stock considered when
exchange testing for
(India) random walk with
high-frequency
financial data
Prof March 2003 – National Unit-root test Positive random
Davinder February stock and variance walk effect
Suri 2015 exchange ratio
(India)

2.5 The efficient market hypothesis

The principle behind the efficient market hypothesis is that the market is efficient, in
fact, to three degree of efficiency, however, no matter what level, it ensures that stock
price will reflect information of the company, making irrational investors hard to buy

9
low and sell high. In other words, it limits the chance of making inside trade or gain
abnormal returns through undervalued stocks. Regarding the degree of efficiency, it is
divided into three types: weak, semi-strong and strong, with strong efficiency allows
no inside trading, as the private information is consistent with the public information,
both of which are reflected through the market value of stock. With the market remains
efficient, the market will be fair between different individuals, without reliance on the
financial analysis to discover advantageous over other investors.
The weak form of efficiency can be clearly described by the simple following example:
if stock prices in a weak-form market, past prices, though included in the current price,
do not signal any future changes. In fact, if price were to be predictable, all investors
would buy the undervalued assets and sell overvalued assets, which would result in a
price increase immediately. Furthermore, the change in price would occur on the
grounds of new information, which is random, setting the characteristic of price
fluctuation as random. Fama (1991) also continued his work on the weak form,
however, instead of considering only past returns, he covered more general areas, which
later be named as 'test for return predictability'. As the name implies, his work aims to
forecast the returns with variables, such as divident yields, interest rates (Fama, Eugene,
1986).
Semi-strong form of efficiency states that market price of stock reflect all public
information, which creates an even higher barrier to perform a financial analysis
yielding successful results. The market is now a fair game to all investors as no one can
beat another using the publicly known information.
Strong form efficient is a stricter barrier to gain abnormal returns through exploitation
of chances. In fact, it is nearly impossible due to the fact that strong form efficient
allows the private information to be reflected through stock prices. This prevents insider
trading and performance of mutual funds to gain abnormal returns.
Though the efficient market hypothesis is still treated with uncertainty by many
academicians, many findings and evidence actually support this theory. Alfred Cowles
(1930), after researching into the performance of investment professionals, asserted that
forecaster cannot forecast. In fact, years later, on the same subject and study, Cowles

10
(1944) concluded that stock market investor cannot beat the market. Regarding the
genuity of efficient market theory, Jensen (1978) made a lasting remark: 'I believe that
there are no other propositions in economics which has more solid empirical evidence
supporting it than the Efficient Market Hypothesis'. In fact, his words holds some truth;
over the span of decades and centuries, the hypothesis were open to debate, but never
truly refuted by majority of academicians or treated as non-sense. In fact, Burton G
(2003) stated that, the stock market might be more efficient and less predictable than it
is describe on some academic papers. The efficient market theory, due to different but
reliable researches and studies, hold true to certain degree, however, not to extreme
level; S Sanford J. Grossman and Joseph E. Stiglitz show that it is impossible for a
market to be perfectly informatively efficient, for instance, if the marker were to be
extremely efficient as mentioned, information, no matter what type, will be made public
and obtainable by the mass, if so, investors afford greatly on costly information will not
receive any forms of compensation.

2.6 Seasonality effect on stock market

As we discuss above, previous findings illustrate the point that the efficient market
hypothesis does not always hold in every stock exchanges, though it should be an ideal
theory to apply for all the markets. Seasonality effect, or known as anomalies, goes
against the EMH and since it makes the market more volatile and unpredictable.
Generally, seasonality effect is also known as calendar effect. It happens at a specific
time and go around in circle such as: Monday effect, day of the week effect, holiday
effect… These effects take place creating anomalies on the specific stock, which will
benefit the investors if they can notice the trend to buy and sell stock at the specific
time. Therefore, this dissertation paper will give a brief idea of how seasonal anomalies
like day of the week effect and month of the year effect.

2.6.1 Day of the week effect

The day of the week effect has never been out of fashion topic for debate for many
researchers and econometricians. The most commonly talked about when we mention
the seasonality effect is Monday effect. On Monday, most markets tend to react
negatively hence investors earn less return on that day than in other days. However,

11
there are some empirical studies find out that Tuesday is the “dead day” of the week
and there are other days in the week effect due to the characteristics of the market and
the people trading behaviors.
Throughout the last decades, a lot of researchers have pulled out some academic papers
about the day of the week effect. However, the most discussed market is US stock
market which present in a study from Hakan Berument and Halil Kiymaz (2001). They
found that the Monday returns are much lower than the other days’ returns during the
period of 1973 - 1997. Michael and Laura (1985) paper examines the day of the week
effect using hourly values of the Down Jones Industrial Average in the period 1963-
1983. They found out that the early part of the sample periods shows a negative return
on each hour of trading on Monday. However, the more recent sub-period illustrates
the opposite side: Monday afternoon seems to create positive return for investors.
In addition to the US stock mrket, there are many other stock analysts test the day of
the week effect in their home market. Jin Zhang (2017) experiences the day of the week
anomaly on a broad scale. The research employed a GARCH model and the method of
rolling sample testing in order to conduct the research and he found out that different
markets have different “dead day”. Halil and Hakan (2002) employed GARCH model
to test the day of the week effect on multiple stock markets. In this paper, Mondays
have the impact on the volatility of Germany and Japan stock market, or Fridays for the
United States and Thursdays for the United Kingdom. An empirical research from
Ahmad Mohammad on Kuwait stock exchange shows that KSE exhibits positive
returns on the first and the last day of the week with significant negative returns on the
Second day of the Trading week.
There are further researches that have been conducted on the day of the week effect.
The table below is the lists of some papers conducted around the world for this effect
with different methods of testing.

12
Author Time period Market Methods Results

Lukas Mazal 2006-2008 German Extended No

dummy significant
approach effect for day
of the week
George E Marret September Australian Regression- A negative
1996 – based Monday
November approach effect and
2006 Tuesday
effect
Siqi Guo, Zhiqiang 1992 – 2006 Chinese F-test and T- Positive
Wang test Friday effect

Liu, Li 2000-2010 Australian Summary Positive

statistics and Monday
t-test return and
negative
Friday return
Sarma 1996-2002 India ( H test and Monday
SENSEX Descriptive effect
AND BSE statistics
200 indices )

WERNER 1993-2007 Latin GARCH Positive

KRISTJANPOLLER America Friday effect
RODRIGUEZ and negative
Monday
effect

13
A previously discussed research of Halil and Hakan also review an interesting
relationship between day of the week effect and trading volumes. They proposed that
for most markets, the days with the highest volatility also coincides with that market’s
lowest trading volume. The other suggested reason is that the settlement cost has been
used to explain day of the week variations. There are 5 trading day in a stock market, if
the settlement day is the second trading day, the Thursday return will be higher than
rest of the week days. If an investor buys on the Wednesday' close price and sell on the
Thursday's close price, then he will earn the high Thursday return. Another reason that
suggested is the investor sentiment in trading activity. Some individual investors
happen to sell their portfolios more on Monday than on other days due to the fact that
the bad news usually come prior the week, and Monday is seen as an opportunity to
satisfy the need for liquidity. So far, there is no particular explanation about day of the
week effect which can be fully satisfied with.

2.6.2 Month of the year effect

Month-of-the-year effect is a term referred to seasonal effect, resulting in high returns
in specific months. In the research conducted by Liu Benjamin, Liu Ben (2011) for 50
stocks in Australia from January 1980 to August 2010 on monthly effect, over half of
his portfolio earns a high return on April as well as December and vice versa on
October. In another study by Rozeff and Kinney (1976), on New York Stock exchange
prices from 1904 to 1974, the average return in January was around 3.5%, much higher
than other monthly average returns. In fact, in most cases and studies, January holds
highest returns and December holds low returns, as clearly explained as in the tax-loss
selling theory. The monthly effect spreads all year round, and depending on national
features, it varies. In the instance of Viet Nam market is the Tet holiday -considered the
largest national holiday, and most often, lasts from month-end of January into first half
of February. It is precisely during this period after the Tet holiday, in February, the
market is unknown.
There is, however, a small difference between the January effect and the monthly effect;
while the first shows noticeable high returns in January, the latter is spread unevenly
throughout the 12 months in the mean returns, depending on unique traits of each

14
nation. The following studies are taken from different regions all over the world on the
monthly effect. In Damascus, Syria, Mouseli and Al-Samman (2016) studied the newly
established Damascus Securities Exchange in 2009 and discovered a monthly effect on
May, caused by Syria's dividend policy, which was explained by Hartzmark and
Solomon (2013). In the market of Kenya, Onyuma (2009) reported that January returns
outpaced the other months, furthermore, there existed day-of-the-week effect on
Fridays, which might be attributed to companies’ announcements policies. On an
international scale, Giovanis (2010) examined over 50 markets, including Indian
market, with a GARCH (1,1) model for analysis, the results have pointed out that a low
percentage of 55 indices exhibited a January effect; in fact, 36% of the indices had
higher returns in December, while in the other markets, January, February and April
had higher returns. From the report of Giovanis, the January effect might not be posing
international influence. More precisely, according to Marrett and Worthington (2011)
using company size and industry type for analysis in Australia, and other researchers
using GARCH model, it is revealed that January effect is heavier on small-cap firms.
Moreover, monthly effects on April and December were observable in the Australian
market. The authors suggested the roots for such anomalies might lie with the tax-losing
theory (Bergh & Wessels, 1985) and firms’ liquidity constraints.
Some studies into the irregularities during hours of crisis have also been put forward.
For instance, Wond, Ho, and Dollery (2007) study on the Malaysian market (KLSE)
between 1994 and 2006 before and after the Asian financial crisis of 1997 with the
purpose of examining the consistency of day-of-the-week anomaly during such crisis.
It is reported February had significantly higher returns in the period before the crisis,
while January effect appeared afterward. Another instance is the study of Abdalla
(2015) on the Khartoum Stock Exchange (KSE) in Sudan, in which returns differed
between the first and last months of the year, demonstrating certain inefficiency against
such an anomaly.
The below table illustrates the list of papers conducted in different stock exchanges
with different testing methods for the month of the year effect:

15
 Authors Period Market Methods Results

Girardin & 1993-2003 Shanghai stock Regime- Negative June

Liu, 2003 market switching and positive
error December
correction effect
model
S.C Thusara, January 2000- Columbo stock Nonlinear Mean return
Prabath Perera December exchange GARCH t higher in
2011 model January,
February,
April and
September
George 9 December Australian Regression- Mean return
Marquette, 1996 stock exchange based higher in
Andrew April, July,
Worthington December
Mohamad, 2000-2012 Dhaka stock Student t’s Negative
Guatai and exchange statistics, February,
Meng (Bangladesh) ANOVA April,
Septemeber,
December
Sulaiman, 2010-2015 Damaskus OLS Positive and
Hazem securities regression significant
exchange return in May

2.7 Other anomalies

2.7.1 Accounting information anomaly
One of the many anomalies in the field of accounting is the changes in stock price after
the accounting information publicity (Levy,2002). The most typical anomaly is the ratio
between book value and market value, or more commonly known B/M ratio, as well as

16
P/E ratio. In fact, according to Stattman (1980, cited by Hernanadez, 2006), the first
B/M ratio effect recorded in the U.S has provided evidence to the positive correlation
between average profit margin and B/M ratio. Some studies ( Fama and French, 1992)
have also drawn similar conclusion that there is actually a powerful relationship
between the two, even more, they suggest that B/M values is a better indicator than
average returns, in fact, with proper control of size and B/M effect, beta will no longer
bare any relation towards average profits. Simply put, for firms with low B/M ratio, it
is possible to predict the future gains with B/M ratio. This statement has been verified
thoroughly by Rosenberg, Reid and Lanstein (1984), Lakonishok et al (1994).
Appraisal and pricing mistakes did exist in the past inside profit strategies based on
B/M, and investors depend greatly on past trends, overly optimistic and pessimistic
expectations on true profit of the market by news and articles (Lakonishok, Shleifer and
Vishny, 1994).
Another accounting anomaly is the abnormal P/E ratio. P/E ratio anomaly refers to the
fact that investors can profit from investing in companies with low P/E ratio because
they think the company is undervalued by using the P/E ratio valuation metric. Sanjoy
Basu (1997) proved that the low P/E portfolio stock is more outperformed than high
ones. Some researches questions about this theory, stating that P/E ratio is just a simple
measurement to really jump into any conclusion. A possible explanation for this effect
is that the return of the market equilibrium model at fault does not put into risk
consideration. CAPM is one method that could account for P/E ratio anomaly. CAPM
can be used as a risk adjustment mechanism, and hence we can associate with the
abnormal return
The relation between P/E ratio and gross margin was first publicized by Nicholson
(1960, cited by Dimson, 1988), showing that stocks with low P/E value brought forth
higher profits than the average ones. Even more firmly is that this conclusion was
verified by Basu (1977, cited by Das, 1993) on NYSE shares, which lead to the main
question: Is P/E ratio effect another anomaly? Das has noticed that a majority of firms
with the lowest P/E values are small firms, therefore, P/E value can be considered as a
proxy for size effects, though there has been opinion voicing opposite views (Banz and

17
Breen, 1986, cited by Das, 1993).
Regarding seasonal and calendar effect, share different pattern with weekly effect due
to the fact that stock gains are not random, but predicted. Moreover, seasonal anomaly
is abnormality over different period of time. It has been open for debate for many stock
market experts for a long time, in fact, over 30 years, it has been researched thoroughly,
not just itself, but also in any relatable effects, such as holiday effects (Lakonishok and
Smidt, 1988), the January effect ( Rozeff and Kinney, 1976), month-of-the-year effect
(Ariel, 1987), month circulation (Cadsby and Ratner, 1992). The proper use following
these studies has been proven extremely effective to explain models of asset valuation,
to challenge the EMH and to applied for seasonal anomaly researches which bare great
success over the globe, for instance, day-of-the-week effect has been tested true in U.S
stock markets by French (1980), Gibbons and Hess (1981) and Harris (1986), in the
Australian, British, and Canadian stock markets by Westerfiled (1985), in the Asia-
Pacific stock market by Ho (1990) and in the French and Italy stock market by Kato
(1990) and Barrone (1990).
During the period between 2000 to 2012, Viet Nam stock market has truly shown the
characteristics of a booming market. Admittedly, the market was not competitive and
resourceful as it is today due to the lack of merchandise and IPOs of renown firms in
the first five years. It is, however, a different story from the course of 2006 to the present
day. The country, through adoption of new policy of offering cross-country investment,
has attracted not just domestic investors but international ones. In fact, these extended
investors from foreign countries add a layer of support to the stock market, which, in
time, attract more foreign capital, according to the Securities Investment. As such, it is
certain to claim that the course of time from 2006 to the present is the intense growth
spurt of securities market, with the construction of various financial infrastructure and
advantageous policy. Thus, it has become an investor-attraction worldwide, allowing
an increase in foreign portfolio equity flow to the country. In fact, ownership of foreign
investors has shown an increase from 2007 to 2008, then a slight reduction in 2009 but
eventually rising at the same pace to 2012. More certainly, EPFR Global, the
internationally renown research company, has publicized its findings on February 22nd

18
of 2012, that in that following year, Viet Nam has received $32.3 million- three times
higher than Malaysia, equivalent capital flow $12.2 million- providing further support
for the up-rising equity flow in Viet Nam. It can be speculated that major attraction of
Viet Nam market lies in lower stock prices than Malaysia's and market recover in 2012.

2.8 Tax loss selling theory

From another perspective, according to Wachtel (1942) and Ritter (1988), such effect
can be mainly attributed to multiple practices of tax-loss selling theory. In this
hypothesis, it is suggested investors sell an asset with capital loss, losing stock as a case
in point, at the end of the year to trade for a tax benefit, and soon repurchase it thereafter
in the next year; thus, abnormal returns are formulated in January. As a matter of fact,
the thesis of tax-loss selling has been considered the main culprit for the January effect
(Chen and Singal, 2004). It is, however, pointed out that various countries hold different
legal standard between tax year and calendar year, in which case, the hypothesis fails
to explain the high returns in January (Brown, Keim, Kleidon and Marsh, 1983).
On the conduct of analyzing the year-end tax effects, a measure of potential tax-loss
selling (PTS) is necessary distribute and label securities. According to standard
procedure, the measure of tax selling is calculated by the division of the security's price
from the second to the last trading day by the maximum price (Reinganum, 1982),
which afterward classified as short-term by the Internal Revenue Service.

19
CHAPTER 3
METHODOLOGY

This chapter describes statistical methods that are chosen for this thesis. This chapter
starts with the brief introduction of the dataset including the data collection method and
the regression model. Furthermore, the data is in time series, so there must be some
preliminary problems that can reduce the efficiency of the regression model. Hence the
execution of several tests to diagnose for the “disease” of the time series data is
necessary. Lastly, the main method ARCH/GARCH is introduced to see how it can be
utilized for this particular problem.

3.1 Data collection

The data collected is the closing price of the daily stock exchange (HOSE) from January
2nd, 2007 to December 31, 2015. There are total 2240 observations in this thesis. There
are some days that are holidays and weekends resulting in non-trading days. Those days
will be excluded in the dataset. The numbers retrieved directly from the VNDirect stock
exchange platform and it is converted to Excel for further calculations. Stock market
return is calculated afterward base on the formula
%&
!" = ln ∗ 100
%&'(

Where
!" : Market return daily in time t
," : Closing market index price in time t
,"-. : Closing market index price in time t-1

3.2 Research methodology

3.2.1 The day of the week regression model
The next section will focus on the specific model of the test, which is GARCH. Firstly,
the dummy variables for examining the former problem namely Dt, Dw, Dth, D5f
represents for Tuesday, Wednesday, Thursday, Friday respectively. Then the regression
the model is displayed as followed

//////////////////////////////////////////////////////////////////////////0 =0 + 1t + 2w + 0hTh+4F+ 0

20
Where Rt is the return for each trading day, 0 is the white noise and 0 is the intercept of
the equation
The dependent variable, which is return on market indexes, is regressed on four
categorical/dummy variables representing 4 days of the week Tuesday, Wednesday,
Thursday, Friday. The missing day Monday which is omitted to avoid the multi
collinearity problem. The problem created when all of the dummies are included with
the extra intercept a1 in the regression model. Therefore, the intercept a1 signifies the
Monday mean returns. The dummy/categorical variables are basically not a value-based
variable. The dummy variables are just representing for a characteristic, features of that
independent variables that have an effect on dependent variables. Hence, the valuation
of dummies is quite complex. If testing for day of the week is applied, then 1 is for
certain day to be tested and 0 is for the rest.

3.2.2 The month of the year regression model

Similarly, the month of the year anomaly examined through dummy variables and we
have omitted April from the measurement for the reason of benchmark month. The
other months are signified from 12/ 03/1.. . In the same way here 45 signifies the mean
return April of which is our benchmark month. Thus, 4. /03/4.. represent the
coefficients of remaining months of the year.
Thus we have the equation:
!" = 4. + 42 12 + 48 18 + ⋯/4.. 1.. + :"

3.3! Model specification

3.3.1 Diagnostic tests
Every linear regression model, especially for time series data, needs to be stationary
over time. There should not be any volatility clustering or serial correlation for the
residuals. If these conditions are violated, the results will not reflect the true
characteristics of the dataset and hence will lead to misleading results.
The above sections describe a various type of tests for time series data including
stationary, heteroskedasticity and autocorrelation tests. Moreover, the ARCH model
will be presented as an alternative approach to fix time series problems and GARCH

21
will also be displayed as a more general form of ARCH family.

3.3.1.1 Stationary tests

This research design is all about time series data and non-stationary is the main problem
when dealing with time series including forecasting and analyzing regression. Formally
speaking, a time series variable is called stationary when its mean and variance constant
over time. It is presented in the equation
E(;" ) = µ (constant mean)
Var(;" ) = <2
Moreover, the covariance between the two consecutive value from the series does not
depend on the actual time that the variables is obtained but the length of time. It is also
denoted in an equation
Cov(;" ,;">? ) = cov(;" ,;"-? ) = ;"
Non-stationary data cause the standard OLS regression procedures to be incorrectly
concluded, especially because of the spurious regressions. Spurious regression is the
threat of having significant regression results based on the unrelated data when non-
stationary series appear in the regression model. Therefore, testing whether a set of time
series are stationary appears to be the first task in any time series based research and
obviously this paper is not excluded.
In stationary time series, shocks will be temporary and over time their effects will be
eliminated as the series revert to their long-run mean values. On the other hand, non-
stationary time series will necessarily contain permanent components. Therefore, the
mean and/or the variance of a non-stationary time series will depend on time, which
leads to cases where a series (a) has no long-run mean to which the series returns, and
(b) the variance will depend on time and will approach infinity as time goes to infinity.
There are various ways of identifying non-stationary series, such as line graph,
correlogram, t statistic test, or Ljung-Box Q statistic test. Asteriou and Hall (2007)
states that “these methods are bound to be imprecise because a near unit-root process
will have the same shape of autocorrelation function with that of a real unit-root. As a
result, Augmented Dickey-Fuller test is more likely to use in practice because it is able
to ensure the uncorrelated errors. In statistics language, if a time series have a unit root,

22
it is referred as non-stationary.
The MacKinnon p-value comes out at 0 with the test statistics at -35.58 in table 1. The
null hypothesis states that the dataset is non-stationary. The p-value has to be under
0.05 to be stationary. From the above statements, the null hypothesis can be rejected
hence the dataset is stationary to move on to next steps in testing time series data

3.3.1.2 Heteroskedasticity
Heteroskedasticity is another problem that reduces the efficiency of the regression
model. It is the case that the variance of the error is not constant over time so basically
if x increases then the error term will increase along side.
If a dataset is diagnosed to be heteroskedasticity, then there is some sort of information
that is inherent which is not included in the model. If we include that information into
the model so the errors increase as the value of x increases. Then we can come up with
an estimator which actually gets closer to y values more of the time. So that is the
underlying intuition why heteroskedasticity means we can construct another estimator
which has a lower variance than least square.
Table 2 is the test for heteroskedasticity for dummy day of the week. Breusch-Pagan is
applied in testing this particular heteroskedasticity problem since it is most commonly
used in other papers. As observed, the p-value is 0 and it i smaller than standard p-value
of 0.05. This leads to the rejection of the null hypothesis, which states that the data is
heteroskedasticity and the variance of error term is not constant over time
The heteroskedasticity test for month of the week effect is quite similar to that of day
of the week. The difference is only the replacement of day to month dummy variable.
The p-value is still zero and hence this leads to the rejection of the null hypothesis of
homoscedasticity. A test of ARCH/GARCH will be conducted further in this research
to account for heteroskedasticity problem.

3.3.1.3 Autocorrelation
Autocorrelation is also another problem that should be taken into account for time series
data. It means that the covariance of some error @A with some error @? does not equal
zero for some i which does not equal s. When there is a problem with the serial

23
correlation, it actually means that the least-squared estimators are no longer best since
there are other linear unbiased estimators which have a lower sampling variance
As can be seen from the table 3, the probability value of autocorrelation is 0. Since then
the null hypothesis is rejected and the conclusion of serial correlation is drawn.

3.3.2 Autoregressive Conditional Heteroskedasticity model (ARCH)

Every stationary data takes into account the facts that the mean and variance value stays
constant over time. If a dataset is non-stationary, it means that either the mean or the
variance fluctuated. Founded by Engle (1982), ARCH model takes into consideration
when it comes with the non-constant variance, which is known as the time-varying
variance processes. The first original work that got Nobel prize, was on the volatility
of inflation. However, this model can be applicable in much different volatility measure
in time series. There are many other different methods such as modeling through
exogenous variables, bilinear model but the most preferred method to model volatility
is the ARCH and GARCH model because it treats the variance as a function of
parameters to avoid heteroskedasticity
Consider a following simple regression model
;" = B5 + :" (1)
:"/ ~/D(0, < 2 ) (2)
< 2 = / 45
Equation (1) says that there is a relationship between the variable with the constant B5
and an error term. The second equation (2) means the disturbance term distributed
normally with variance < 2 /HIJ/KLHI/0. The last equation (3) assumes that the
variance is constant, denoted as 45 . This equation is the simplest form of linear
regression since it has no independent variable included. The independent variable
assumes to be omitted as it is the first essential feature of developing ARCH model
Next, there will be three processes to develop the model. Firstly, the time varying
characteristics of error term are assumed, which means that the model is
heteroskedasticity over time. Then attach ℎ" as a term for variance from now on.
Secondly, let the distribution of the error is conditionally normal :"/ |O"-. ~D 0, ℎ"
such that O"-. /is the information available in the preceding time of t. Finally, we match

24
the function of variance denoted as ℎ" to the constant term with the lagged error squared
2
L"-. . Putting all of these assumptions, we have a following regression
;" = / B5/ + / :" (4)
:" |O"-. /~/D(0, ℎ" )/(5)
2
ℎ" = / 45 + / 4. L"-. 45 > /0, 0 ≤ 4. < 1 (6)
The equation (4) and (5) signify for the ARCH(1) model. The number one in the bracket
represents for the number of one lag t-1 that exist in the model. The model stands out
because it is dealing with both the lagged effect (autocorrelation) and time-varying
variance (heteroskedasticity) since the time-varying variance ℎ" is a function consists
of a constant term plus with an intercept of the lagged effect, which is the error squared
in the previous period. Although it is a convenient to model through ARCH, there may
be problems that include a large series of lags that can not be accumulated and hence it
may lead to false estimation. Therefore, the next section is going to be the model that
solve this particular problem of ARCH

3.3.3 Generalized ARCH (GARCH)

As mentioned earlier, GARCH(p,q) model can account for long lags when q is a large
number. The general form of GARCH is
2
ℎ" = /S + 4. :"-. + B. ℎ"-.
δ = 45 − B./ 45
This generalized ARCH model is denoted as GARCH (1,1) model and it is in used for
our analysis with p=1 and q=1. The p,q value in the bracket are the numbers of lagged
for variance and error respectively. Also the assumption of 4. + B. < 0/take place
since it is a mandatory requirement for time series data to be stationary.
Also the GARCH model is characterized through the volatility movements in positive
or negative way. Usually when the bad news come, the market tends to react more
intensive than for good news and hence the shocks created as a result. These shocks
will make the price of the stock or the market index fluctuate. When there are negative
shocks, the market is more volatile, and the price will go down. As the result, the equity
value of company decreases, leading to the downfall of the debt to equity ratio.

25
Consequently, the investors believe that their future cash flows decrease as the debt
ratio increase, which means that they have to bear more debt for their investment and
the company is riskier in terms of solvency. This is called the leverage effect.

26
CHAPTER 4
ANALYSIS OF RESULTS

4.1 Day of the week effect

4.1.1 GARCH method

The ARCH parameter also named the lagged squared residual, gives a high outcome

27
that reflects the certainness of autocorrelation problem in the squared residual.
Therefore, there is an ARCH effect.
The GARCH probability value is significant so there will be a high degree of correlation
between volatility and stock returns. What can be seen from the table is that Monday
tends to be the most volatile of all the days of the week with the standard error of 0.083.
When analyzing data for the day of the week, it is obvious to see that p-value of Tuesday
is significant at 5% and that of Thursday is significant at 10%. These statistical results
tell the fact that there is a positive day of the week effect, which appears on Tuesday
and Thursday.

4.1.2 Descriptive statistics

Running descriptive statistics can be helpful by giving the initial look at the dataset and
by implying any seasonal effect given in the mean. The figure above shows the
descriptive statistics of daily return of each specific day of the week. As observed,
Friday has the highest mean of around 0.11 and quite larger than other days. Together
with Wednesday, Friday has a positive mean among other days meaning that these two
days yield a positive return for investors. On the other hand, Tuesday shows a
significant negative return of -0.17 in the descriptive statistic box. Moreover, the
standard deviations of Monday are the highest, indicating that the Monday index is
more volatile than other days. Overall, the market index from 2007 to 2015 has a slight
negative mean return with the data is normally distributed as the skewness and kurtosis
reach near the standard form of normal distribution (skewness 0 and
kurtosis 3)

28
4.2 Month of the year effect
4.2.1 GARCH method
The table below gives out information about the command in Stata and the features of
the regression while table four illustrates the results come out with ARCH(1)
GARCH(1,1) model. November has the p-value of 0.003 and the level of significance
is 1%. This explains that there a November effect in our market index.

29
4.2.2 Descriptive statistics
As can be seen clearly from the table below, January outperform other months, with the
mean reaching 0.36. However, the market seems to be volatile in this month with the
second highest standard deviations among the others. In general, the skewness value is
negative across the months, except for January, June and July. On the other hand,
Kurtosis value shows negative sign only on February and most of the month experience
a quite similar small kurtosis, ranging from 0.5 to 1.8.

30
CHAPTER 5
SUMMARY AND CONCLUSION

This dissertation paper analyzed the daily and monthly HOSE returns in Vietnam. The
reason for choosing this market because this is a one of a world’s fast-growing stock
market. The data is the closing price of the market index from January 2nd,2007 to
December 31VW ,2015. After conducting several tests such as Descriptive statistics and
GARCH(1,1), the results slightly vary across the methods.
For day of the week anomaly, GARCH model gives a positive signal on the abnormal
return on Tuesday and Thursday while descriptive statistics states the abnormality on
Friday. Moreover, there is a positive month of the year anomaly of November using
GARCH analysis. However, descriptive statistics shows the mean return on January to
be the highest. The mixed results come from the fact that the descriptive statistics is not
the exact method because it does not exclude the heteroskedasticity and autocorrelation
problem of time series. With the result presented by GARCH, we can conclude that the
Vietnamese market is not efficient. Consequently, EMH does not hold in this market.
This thesis did not contain any detailed discussion on how and what the investment
strategy that should be exploited for the anomaly effect. It would be interesting to
conduct quantitative research to see whether the transaction costs eliminate potential
excessive return.

APPENDICES
Table 1
Stationary test

31
 Table 2
Heteroskedasticity test

Table 3
Autocorrelation test

32
 Table 4
Normality test

33
 Figure 1: Normal distribution graph

Figure 2: Market capitalization as a percentage of GDP

34
 (Source: World Bank)

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