Overreaction in a Frontier Market: Evidence from the Ho Chi Minh Stock Exchange

Loc Dong Truong (), Giang Ngan Cao, H. Swint Friday and Nhien Tuyet Doan
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Loc Dong Truong: School of Economics, Can Tho University, Can Tho 94115, Vietnam
Giang Ngan Cao: School of Economics, Can Tho University, Can Tho 94115, Vietnam
H. Swint Friday: RELLIS Campus, Texas A&M University, Bryan, TX 77807, USA
Nhien Tuyet Doan: School of Economics, Can Tho University, Can Tho 94115, Vietnam

IJFS, 2023, vol. 11, issue 2, 1-12

Abstract: The purpose of the study is to investigate the overreaction hypothesis in relation to the Ho Chi Minh Stock Exchange (HOSE). The data used in this study consist of a monthly price series of 392 stocks traded on the HOSE, covering the period starting on 5 January 2004 through to 30 June 2021. The findings derived from the tests examining the differences in excess returns across the winner and loser portfolios confirm that the overreaction phenomenon exists in the HOSE. More specifically, following the creations of the portfolios, the loser portfolio outperformed the winner portfolio by 1.80% and 2.17% in the second and third month, respectively. In addition, the differences in cumulative abnormal returns between the loser and winner portfolios were significantly positive for almost all tracking periods. These findings support the hypothesis that the Vietnam stock market is inefficient in its weak form. Based on these results, we suggest that investors can earn abnormal returns by using contrarian trading strategies in the Vietnam stock market.

Keywords: overreaction; HOSE (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2023
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