Title: Liquidity, liquidity risk and stock returns: evidence from Vietnam
Authors: Xuan Vinh Vo; Hong Thu Bui
School of Banking, University of Economics Ho Chi Minh City, 279 Nguyen Tri Phuong Street, District 10, Ho Chi Minh City, Vietnam; CFVG Ho Chi Minh City, 54 Nguyen Van Thu Street, District 1, Ho Chi Minh City, Vietnam
School of Economics and Finance, Ho Chi Minh City University of Foreign Languages – Information Technology, Vietnam
Abstract: The question of whether liquidity is priced is a subject for a huge volume of papers in the asset-pricing literature. Asset-pricing theory suggests a negative relationship between these two variables as investors demand higher returns to compensate for less liquid stocks. However, the empirical evidence is not unanimous. This paper investigates the relationship between liquidity and stock return in Vietnam by employing an updated dataset of market and financial data of listed companies in the Ho Chi Minh City stock exchange ranging from 2007 to 2012. Our results suggest that the relationship between liquidity and stock returns is different in Vietnam stock market. In other words, we document a reliable positive relationship between liquidity measures and stock returns and negative relationship between illiquidity measures and stock returns. However, we do not find evidence in supporting the relation between risk associated with fluctuation in liquidity and stock returns.
Keywords: liquidity risk; stock returns; Vietnam; asset pricing; stock markets.
Int. J. of Monetary Economics and Finance, 2016 Vol.9, No.1, pp.67 - 89
Submission date: 20 Jul 2015
Date of acceptance: 08 Sep 2015
Available online: 05 Feb 2016