Tài liệu Oil prices and stock returns evidence from vietnamese petroleum and transportation industries luận văn thạc

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MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY Tran Huu Nghi OIL PRICES AND STOCK RETURNS: EVIDENCE FROM VIETNAMESE PETROLEUM AND TRANSPORTATION INDUSTRIES MASTER’S THESIS HO CHI MINH CITY 2010 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY Tran Huu Nghi OIL PRICES AND STOCK RETURNS: EVIDENCE FROM VIETNAMESE PETROLEUM AND TRANSPORTATION INDUSTRIES Ology: Finance – Banking Ology code: 60.31.12 MASTER’S THESIS Advisor PhD. Nguyen Thu Hien HO CHI MINH CITY 2010 Acknowledgements First of all, I would like to express my deepest gratitude and sincere thanks to my advisor, PhD. Nguyen Thu Hien, for her valuable advice, suggestions, and comments throughout every step of my study. Secondly, I would like to thank all my professors for giving me fundamental and academic knowledge during years of my study. Especially, I would like to send my special thanks to Dr. Cao Hao Thi, who gave me necessary statistical knowledge to finish this study. Thirdly, my thanks would also go to my classmates, and my colleagues for their supports and encouragements. Finally, I would like to thank my parents, and all members in my family those who are always by my side and encourage me during my study. i Abstract The study aims to examine the impact of oil price changes on the stock returns in Vietnam market by analysing daily data during the period from January 2006 to December 2009. The international multi-factor model is taken as an approach in the paper in order to investigate the relationship between oil price changes and stock returns of Ho Chi Minh Stock Exchange, petroleum, and transportation industries on Ho Chi Minh Stock Exchange. Evidence shows that there are significant links between oil price changes of the previous day and stock returns of these two industries and HoSE. These results are useful for investors, managers, and policy makers. ii TABLE OF CONTENTS Acknowledgements..............................................................................................i Abstract...............................................................................................................ii TABLE OF CONTENTS...................................................................................iii LIST OF FIGURES.............................................................................................v LIST OF GRAPHS..............................................................................................v LIST OF TABLES.............................................................................................vi ABBREVIATIONS...........................................................................................vii CHAPTER 1: INTRODUCTION 1.1 Rationale of the study..................................................................................01 1.2 Research questions and objectives..............................................................03 1.3 Scope and limitation....................................................................................03 1.4 Research methodology................................................................................03 1.5 Significance of the study.............................................................................04 1.6 Structure of the study..................................................................................04 CHAPTER 2: LITERATURE REVIEW 2.1 Theoretical background...............................................................................06 2.1.1 Market efficiency................................................................................06 2.1.2 Capital Asset Pricing Model (CAPM)................................................08 2.1.3 Arbitrage Pricing Theory (APT).........................................................10 2.1.4 Oil price changes and rationality of Stock market..............................12 2.2 Previous researches.....................................................................................14 CHAPTER 3: METHODOLOGY AND DATA 3.1 Research methodology................................................................................17 3.1.1 Research design...................................................................................17 3.1.2 Quantitative research...........................................................................18 iii 3.2 Data description...........................................................................................22 3.2.1 Stock returns........................................................................................24 3.2.2 Oil price changes.................................................................................27 3.2.3 Exchange rate returns..........................................................................28 CHAPTER 4: DATA ANALYSIS 4.1 Desciptive statistics.....................................................................................29 4.2 Regression results........................................................................................31 4.2.1 Correlations.........................................................................................31 4.2.2 Regression results with OILt-1.............................................................33 4.3 Summary of regression results....................................................................44 CHAPTER 5: CONCLUSIONS 5.1 Overview.....................................................................................................46 5.2 Summary of findings...................................................................................47 5.3 Limitations and further researches..............................................................50 References........................................................................................................52 Appendices Appendix 1: Vietnam petro prices 2006-2009.............................................55 Appendix 2: Regulated amplitude of exchange rate 2006-2009..................56 iv LIST OF FIGURES Figure 1.1: Structure of the study...............................................................................01 Figure 3.1: Research design.......................................................................................17 Figure 3.2: Research hypotheses................................................................................19 Figure 4.1 Hypothesis H1 testing result.....................................................................36 Figure 4.2 Hypotheses H2, H3, H7 and H8 testing results........................................41 LIST OF GRAPHS Graph 1.1: Oil prices and VNindex in 2008..............................................................01 Graph 3.1: Fluctuation of oil price 2006-2009...........................................................23 Graph 3.2: Fluctuation of VNindex 2006-2009.........................................................23 Graph 4.1: Histograms and Q-Q plots of daily stock returns.....................................30 Graph 4.2 Histogram and Q-Q plot of index residual................................................36 Graph 4.3: Histogram and Q-Q plot of petro residual...............................................42 Graph 4.4 Histogram and Q-Q plot of trans residual.................................................42 v LIST OF TABLES Table 3.1: Testing hypotheses for the significance....................................................22 Table 3.2: List of stocks in the petroleum industry....................................................26 Table 3.3: List of stocks in the transportation industry..............................................26 Table 4.1: Descriptive statistics of stock returns, oil price changes, and exchange rate returns.........................................................................................................................29 Table 4.2: Correlations of Indext, Petrot, Transt with OILt and TWEXt....................32 Table 4.3: Correlations of Indext, Petrot, Transt with OILt-1.......................................34 Table 4.4: Regression analysis of the relation between Indext and OILt-1.................35 Table 4.5 Hypothesis H1 testing result......................................................................36 2 Table 4.6 Regression analysis of the relation between Ln( ε Indext ) and E(Indext)........38 Table 4.7 Regression analysis of the relation between Petrot and OILt-1...................38 Table 4.8 Regression analysis of the relation between Transt and OILt-1..................39 Table 4.9 Hypotheses H2, H3, H7 and H8 testing results..........................................40 Table 4.10 Correlation between OILt-1 and Index residual........................................41 Table 4.11 Corelation between OILt-1 and Index residual..........................................43 2 Table 4.12 Regression analysis of the relation between Ln( ε Petrot ) and E(Petrot)......44 2 Table 4.13 Regression analysis of the relation between Ln( ε Transt ) and E(Transt)......45 Table 5.1 Changes in ROE.........................................................................................48 Table 5.2 Summary of the study hypotheses testing results......................................50 vi ABBREVIATIONS ADF Augmented Dickey – Fuller APT Arbitrage Pricing Theory CAPM Capital Asset Pricing Model GCC Gulf Cooperating Council HoSE Ho Chi Minh Stock Exchange OLS Ordinary Least Square ROE Return on Equity vii Page 1 Chapter 1 Introduction CHAPTER 1: INTRODUCTION This chapter introduces the rationale of the study, research questions and objectives. The study scope, significance, and the structure of the study are also discussed in this chapter. 1.1 RATIONALE OF THE STUDY Oil is a very essential energy for any country all over the world. Changes in oil price have become one of the most important factors that contribute to current global economic activity. Oil price hikes would make price in commodities increase, and in turn, hearten global inflation and slow down economic growth. Moreover, oil is one of the operational cost factors. The higher oil price increases, the higher production cost is. For this reason, oil price hikes will cause expected earnings to decline, which bring a decrease in stock prices. In other words, increasing oil price potentially affects stock market performance by altering financial performance or cash flows of companies. As illustration of this, the oil price increased 52.67% between January 2008 and June 2008, and VNindex decreased 52.68% on the same period. 160 700 600 500 120 400 300 200 100 0 140 100 80 60 40 20 0 Oil Pric e (U S$per barrel) 900 800 Ja n0 Fe 8 bM 08 ar -0 Ap 8 rM 08 ay -0 Ju 8 n0 Ju 8 l-0 Au 8 gSe 08 p0 O 8 ct -0 No 8 vDe 08 c08 VNindex Graph 1.1: Oil prices and VNindex in 2008 VN index Oil Pric e Chapter 1 Introduction Page 2 Many papers in the world investigated the relationship between oil price changes and the stock returns. However, the results were various. For instance, using an international multifactor model, Basher and Sadorsky (2006) showed a significant relationship between oil price changes and stock markets in emerging countries. By contrast, other papers showed that oil price changes do not have significant impacts on stock returns (Chen, Roll, and Ross - 1986, Agusman and Deriantino – 2008) or oil future returns are not correlated with stock market returns, except in the case of oil company returns (Huang et al. – 1996) or changes in oil price affect trivially real stock returns in net oil exporting countries (Jones and Kaul – 1996). Thus, whether there is any relationship between oil price changes and Vietnam stock returns or not is still a big question without answer. Therefore, the aim of the study is to examine the impact of oil price changes on Vietnam stock returns in order to find out the answer for that big question. The study is important because of several reasons: • First, Stock market contribution to the Vietnam economy, which is indicated by the share of market capitalisation to GDP, has been increasing rapidly. In 2005, market capitalisation to GDP was 0.69%. It went up sharply to 22.6% in 2006, and by the end of 2007 was 40%. It is clear that the role of the stock market in the domestic economy is more and more significant, and it is important to examine any risk factors contribute to stock performance, including changes of oil price. • Second, it expects that oil price changes would influence the domestic economy, and this could be caused by their impact on the stock market. However, very limited research on this has been made. By examining the Vietnam data, the study will contribute to the literature on this area. Chapter 1 Introduction Page 3 1.2 RESEARCH QUESTIONS AND OBJECTIVES The objectives of the study are to examine the impact of oil price changes on Vietnam stock exchange market in general, and to measure the impact of oil price changes on stock returns of petroleum and transportation industries by using daily data during the period from January 2006 to December 2009. The study will be the answer for these questions: • Is there a relationship between oil price and stock returns in Vietnam? • How does oil price affect to the Vietnam stock market in general, and to stock returns of petroleum and transportation industry in particular? 1.3 SCOPE AND LIMITATION Due to time restriction, the study will examine the impact of oil price changes on Ho Chi Minh Stock Exchange, and measure the impact of oil price changes on stock returns of petroleum and transportation industry on Ho Chi Minh Stock Exchange, which are two on many industries affected directly by oil price changes. Data will be collected during the period from January 2006 to December 2009 on Ho Chi Minh Stock Exchange. 1.4 RESEARCH METHODOLOGY This study uses the multiple regression model for the stock returns of Ho Chi Minh Stock Exchange, and petroleum and transportation industries to define the relationship between oil price and Vietnam stock returns, and to measure this relationship. The data for this study consist of daily oil price changes, and stock returns during the period from 2006 to 2009. Daily stock returns are calculated from closing prices of HoSE index, and stocks in petroleum and transportation industries. Oil prices are the West Texas Intermediate Spot prices FOB of crude oil, which are available from the Energy Information Administration. Page 4 Chapter 1 Introduction 1.5 SIGNIFICANCE OF THE STUDY • Examining the impact of oil price changes on the stock returns helps government to make plans and macroeconomic policies based on predicting of oil price changes so that they could regulate more effectively the Stock Exchange particularly and the domestic economy generally. • Besides, it also gives investors evidences that help them to analyse and to manage their portfolios more efficiently. 1.6 STRUCTURE OF THE STUDY The study consists of 5 chapters: - Chapter 1 (Introduction) introduces the study. This chapter includes the rationale of the study, research objectives, research methodology, significance of the study, and scope and limitation. - Chapter 2 (literature review) shows theoretical background related to the study, and previous researches in the study’s field. - Chapter 3 (Methodology and data) discusses the research methodology, and describes the data used in the study as well. - Chapter 4 (data analysis and findings) analyses data and finds out the impact of oil price changes on stock returns based on the analysed data. - Chapter 5 (conclusions) summarises the study, indicates limitations and suggests possible further researches. Page 5 Chapter 1 Introduction Figure 1.1: Structure of the study Chapter 1: Introduction Chapter 2: Literature review Chapter 3: Methodology and data Chapter 4: Data analysis Chapter 5: Conclusions Chapter 2 Literature Review Page 6 CHAPTER 2: LITERATURE REVIEW This chapter discusses in details the theoretical background related to the study, such as Market Efficiency, Capital Asset Pricing Model, and Arbitrage Pricing Theory. Some previous researches are also introduced in this chapter. 2.1 THEORETICAL BACKGROUND 2.1.1 Market Efficiency In finance, there are some models which describe the structure of stock prices based on different factors, such as Capital Asset Pricing Model, and Arbitrage Pricing Theory. In fact, investors are much interested in how fast stock prices fluctuate in response to changes to the relevant factors. In order to examine these changes, it is very necessary to understand the concept of financial market efficiency. The efficient-market hypothesis was first expressed by Louis Bachelier in his 1900 dissertation, “The Theory of Speculation”. Bachelier recognises that “past, present and even discounted future events are reflected in market price, but often show no apparent relation to price changes”. However, his work was largely ignored until 1950s. The efficient-market hypothesis was developed by Professor Eugene Fama at the University of Chicago Booth School of Business as an academic concept of study through his published Ph.D. thesis in the early 1960s at the same school. It was generally believed that securities markets were extremely efficient in reflecting information about individual stocks and about the stock market as a whole. The accepted view was that when information arises, the news spreads very quickly and is incorporated into the prices of securities without delay. Thus, neither technical analysis, which is the study of past stock prices in an Chapter 2 Literature Review Page 7 attempt to predict future prices, nor even fundamental analysis, which is the analysis of financial information such as company earnings, asset values, etc., to help investors select “undervalued” stocks, would enable an investor to achieve returns greater than those that could be obtained by holding a randomly selected portfolio of individual stocks with comparable risk. There are three common forms of financial market efficiency, which were defined in a published paper of Fama in 1970: weak-form efficiency, semistrong-form efficiency and strong-form efficiency, each of which has different implications for how markets work. In weak-form efficiency, future prices cannot be predicted by analyzing price from the past. Excess returns can not be earned in the long run by using investment strategies based on historical share prices or other historical data. Technical analysis will not be able to consistently produce excess returns, though some forms of fundamental analysis may still provide excess returns. Share prices exhibit no serial dependencies, meaning that there are no "patterns" to asset prices. This implies that future price movements are determined entirely by information not contained in the price series. Hence, prices must follow a random walk. In semi-strong-form efficiency, it is implied that share prices adjust to publicly available new information very rapidly and in an unbiased fashion, such that no excess returns can be earned by trading on that information. Semi-strong-form efficiency implies that neither fundamental analysis nor technical analysis will be able to reliably produce excess returns. In strong-form efficiency, share prices reflect all information, public and private, and no one can earn excess returns. If there are legal barriers to private information becoming public, as with insider trading laws, strong-form Chapter 2 Literature Review Page 8 efficiency is impossible, except in the case where the laws are universally ignored. 2.1.2 Capital Asset Pricing Model (CAPM) The Capital Asset Pricing Model (CAPM) is used to specify the relationship between risk and required rates of return on assets when they are held in welldiversified portfolios. The model takes into account the asset's sensitivity to non-diversifiable risk (also known as systematic risk or market risk), often represented by the quantity beta (β) in the financial industry, as well as the expected return of the market and the expected return of a theoretical risk-free asset. The model was introduced by Jack Traynor (1961, 1962), William Sharpe (1964), John Lintner (1965a,b) and Jan Mossin (1966) independently, building on the earlier work of Harry Markowitz on diversification and modern portfolio theory. Sharpe, Markowitz and Merton Miller jointly received the Nobel Memorial Prize in Economics for this contribution to the field of financial economics. Basic assumptions of the CAPM1: 1. All investors focus on a single holding period, and they seek to maximize the expected utility of their terminal wealth by choosing among alternative portfolios on the basic of each portfolio’s expected return and standard deviation. 2. All investors can borrow or lend an unlimited amount at a given risk-free rate of interest, and there are no restrictions on short sales of any asset. 1 Eugenne F.Brigham, Michael C. Ehrhardt, Financial Management Theory and Practice, Tenth Edition, page 257 Chapter 2 Literature Review Page 9 3. All investors have identical estimates of the expected returns, variances, and covariances among all assets; that is, investors have homogeneous expectations. 4. All investors are price takers (that is, all investors assume that their own buying and selling activity will not affect stock prices) 5. There are no transactions costs or taxes. 6. All assets are perfectly divisible and perfectly liquid. 7. The quantities of all assets are given and fixed. 8. All information is available at the same time to all investors. 9. The market is perfect competitive. The formula: The CAPM is a model for pricing an individual security or a portfolio. The Capital Market Line (CML) specifies the relationship between risk and return for an efficient portfolio that is a combination of the risk-free security and the market-value-weighted portfolio of all risk assets in the economy. CLM: E(Rp) = Rf + E(RM) - Rf σ M * σ p where: ⋅ E(Rp) is the expected return of the portfolio ⋅ E(RM) is the expected return of the market ⋅ Rf is the risk-free rate of interest, such as interest arising from government bonds ⋅ σ M is the standard deviation of the market Chapter 2 Literature Review ⋅ σ p Page 10 is the standard deviation of the portfolio For individual securities, Security Market Line (SML) is used to show the relationship between risk and return. SML: E(Ri) = Rf + [E(RM) - Rf] * βi where: ⋅ E(Ri) is the expected return of the capital asset ⋅ βi (Beta coefficient) is the sensitivity of the expected asset returns to the expected market returns, or also βi = Covariance between asset i and the market Variance of market returns = Cov (Ri, RM) σ 2 M ⋅ [E(RM) - Rf ] is called the market risk premium. 2.1.3 Arbitrage Pricing Theory (APT) In finance, Arbitrage Pricing Theory (APT) is a general theory of asset pricing, that has become influential in the pricing of stock. The theory was initiated by the economist Stephen Ross in 1976. Ross argues that if equilibrium prices offer no arbitrage opportunities over static portfolios of the assets, the expected returns on the assets are approximately linearly related to the factor loadings. Unlike CAPM, a single-factor model, APT can include any number of risk factors, so the required rate of return could be a function of two, three, four, or more factors. Thus, the return of risk assets can be expressed as follow: Ri = E(Ri) + [F1 – E(F1)]* βi1 + … + [Fj – E(Fj)]* βij + εi where ⋅ Ri is the realised rate of return on Stock i Chapter 2 Literature Review Page 11 ⋅ E(Ri) is the expected rate of return on Stock i ⋅ Fj is the realised value of economic Factor j ⋅ E(Fj)] is the expected value of economic Factor j ⋅ βij is the sensitivity of Stock i to economic Factor j ⋅ εi is the effect of unique events on the realised return of Stock i (or idiosyncratic risk of Stock i) Theoretically, an investor could construct a portfolio such that (1) the portfolio was riskless and (2) the net investment in it was zero. Such a zero investment portfolio must have a zero expected return, or else arbitrage operations would occur and cause the prices of the underlying asset to change until the portfolio’s expected return was zero (Eugenne F.Brigham and Michael C. Ehrhardt). Therefore, the APT equivalent of the CAPM’s Security Market Line can be developed as follow: Ri = Rf + (R1 – Rf)* βi1 + … + (Rj – Rf)* βij Here Rj is the required rate of return on a portfolio that is sensitive only to the jth economic factor (βj = 1) and has zero sensitivity to all other factors. The primary theoretical advantage of the APT is that it permits several economic factors to influence individual stock returns, whereas the CAPM assumes that the effect of all factors, except those unique to the firm, can be captured in a single measure, the volatility of the stock with respect to the market portfolio. Also, the APT requires fewer assumptions than the CAPM and hence is more general. Finally, the APT does not assume that all investors hold a market portfolio, a CAPM requirement that clearly is not met in practice.
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