An application of a R2 dcomposed linkage method to explore a comtemporal and lead connectedness between investor sentiment and exchange rate dynamics in vietnam

To Trung Thanh () and Le Thanh Ha ()
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To Trung Thanh: National Economics University
Le Thanh Ha: National Economics University

Quality & Quantity: International Journal of Methodology, 2025, vol. 59, issue 1, No 10, 259 pages

Abstract: Abstract Employing the R2 decomposed linkage methodology, our study endeavors to elucidate interrelations, particularly distinguishing between concurrent and delayed connections. This novel approach is utilized to scrutinize the transmission mechanism of returns between the Investor Sentiment Index (ISI) and VN Index (VNI), as well as the five most frequently exchanged foreign currencies vis-à-vis the Vietnamese Dong, namely USD/VND, EUR/VND, GBP/VND, JPY/VND, and CNY/VND. The investigation spans from January 1st, 2017, to November 25th, 2023. It is discerned that delayed connections exert a more pronounced influence across all instances. Investment sentiment exhibits a relatively constrained impact on shocks, regardless of its role as a transmitter or receiver, with its significance primarily manifesting through lagged relationships. Three distinct time periods showcase the conspicuous net shock receiver effect of investment sentiment: the latter part of 2018, the latter portion of 2019 to early 2020, and the initial half of 2023. In aggregate, the COVID-19 epoch witnesses an escalated significance of investment sentiment. Notably, the net shock transmitter function of investment sentiment predominates solely during intervals encompassing the latter part of 2017 to the early part of 2018 and the latter segment of 2020.

Keywords: Investor sentiment; Exchange rate volatility; Vietnam; Uncertain times; A R2 decomposed linkage method (search for similar items in EconPapers)
JEL-codes: C22 C51 D53 H1 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11135-024-01979-7

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