The relation between stock return and air quality in Vietnam under impacts of COVID-19

Abstract

In this paper, we examine interactions between daily changes in VN index and air quality (represented by the atmospheric particulate matter PM2.5 index) of Ho Chi Minh City based on the conditional correlation bivariate generalised autoregressive conditional heteroskedasticity mechanism. We find that: 1) air quality positively affects the stock return from 2016 to 2019; 2) stock return and air quality negatively affect to each other during the period of novel coronavirus disease (COVID-19) pandemic. In other words, the relation between stock return and air quality in Vietnam became a trade-off due to COVID-19. Thus, we construct a hypothetical portfolio of the VN index and air quality to find the weights that bring optimal interests before and after the pandemic. Of which, the weight of air quality significantly increases under the impacts of COVID-19.