Effects of fundamental and behavioral factors on stock price volatility: the case of Vietnam and East Asian countries

Abstract

This paper examines the effects of a number of factors, both fundamental (inflation rate, nominal effective exchange rate, interbank interest rate and money supply) and behavioral (country risk), to the volatility of stock markets in four Asian countries: Vietnam, China, Japan and South Korea using the Autoregressive Distributed Lag (ARDL) model. The volatility figures were found using EGARCH model beforehand. The results show that while the chosen fundamental affect all four stock markets in the short term in various degrees, it is most likely for the Vietnamese market to affected by fundamental factors in the long run. On the other hand, the effect of the chosen behavioral factor is more ambiguous. Furthermore, there are signs that volatility shocks in the chosen market are only transitory and not very likely to persist.