 The Impact of Market Liquidity on The Stock Returns During the COVID-19 Outbreak: New Evidence from VietnamCuong Nguyen Thanh and
Hai Phan Thanh
Advances in Decision Sciences, 2024, vol. 28, issue 1, 75-95 Abstract: [Research aims] This article examines the impact of market liquidity, as measured by market tightness and depth, on the stock returns of non-financial companies listed on the Vietnam Stock Market during the COVID-19 outbreak. [Design/Methodology/Approach] We collected daily data spanning from January 30, 2020, to December 31, 2021, for 647 non-financial companies listed on the Vietnamese stock market and employed a fixed-effects panel data regression model to analyze the data. [Research findings] Our findings show a statistically significant and negative relationship between market tightness and stock returns. Additionally, market depth demonstrates a noteworthy positive relationship with stock returns. These findings suggest that stocks with lower liquidity tended to yield higher returns during the COVID-19 pandemic. Notably, this phenomenon was accentuated during periods of lockdown. The study also disclosed a noteworthy difference in the influence of market liquidity on stock returns among companies listed on the HOSE and HNX stock exchanges. Further analysis unveils a marked variance in the impact of market liquidity on stock returns when examined across different sectors and market capitalizations. Notably, the liquidity of the service and manufacturing sectors has the strongest influence on stock returns during COVID-19. [Theoretical contribution/Originality] No published studies have investigated the impact of market liquidity on the stock returns of companies listed in emerging markets, such as the Vietnamese stock market, during the COVID-19 outbreak. This study is the first to examine how market liquidity, as measured by market tightness and depth, affects the stock returns of non-financial firms listed on the Vietnam Stock Market during the COVID-19 outbreak. An examination of the impact of market liquidity on stock returns is conducted, taking into account industry-specific variations and differences in market capitalization. [Practitioner/Policy implications] Our study demonstrates the critical role of liquidity and the attractiveness of low-liquidity stocks during the COVID-19 outbreak in Vietnam. The findings provide novel and substantial evidence for the field of Decision Science. Through an in-depth analysis of market fluctuations amid the pandemic, the article offers essential insights into the intricate interaction between market liquidity and stock returns, uncovering valuable implications for policy decisions and investment strategies for individual investors and organizations. [Research limitations] This study focuses on listed non-financial firms, so the results may not be generalizable to the whole market. Future studies may consider adding financial firms to the sample. Keywords: COVID-19; Stock returns; Market liquidity; Market depth; Market Tightness (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:aag:wpaper:v:28:y:2024:i:1:p:75-95 Access Statistics for this article More articles in Advances in Decision Sciences from Asia University, Taiwan Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.