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Liquidity, liquidity risk and stock returns: evidence from Vietnam

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  • Xuan Vinh Vo
  • Hong Thu Bui

Abstract

The question of whether liquidity is priced is a subject for a huge volume of papers in the asset-pricing literature. Asset-pricing theory suggests a negative relationship between these two variables as investors demand higher returns to compensate for less liquid stocks. However, the empirical evidence is not unanimous. This paper investigates the relationship between liquidity and stock return in Vietnam by employing an updated dataset of market and financial data of listed companies in the Ho Chi Minh City stock exchange ranging from 2007 to 2012. Our results suggest that the relationship between liquidity and stock returns is different in Vietnam stock market. In other words, we document a reliable positive relationship between liquidity measures and stock returns and negative relationship between illiquidity measures and stock returns. However, we do not find evidence in supporting the relation between risk associated with fluctuation in liquidity and stock returns.

Suggested Citation

  • Xuan Vinh Vo & Hong Thu Bui, 2016. "Liquidity, liquidity risk and stock returns: evidence from Vietnam," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 9(1), pages 67-89.
    • Handle: RePEc:ids:ijmefi:v:9:y:2016:i:1:p:67-89
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    Cited by:

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    2. Huang, Xiangqian & Liu, Clark & Shu, Tao, 2023. "Factors and anomalies in the Vietnamese stock market," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    3. Manh-Tung Ho & Ngoc-Thang B. Le & Hung-Long D. Tran & Quoc-Hung Nguyen & Manh-Ha Pham & Minh-Hoang Ly & Manh-Toan Ho & Minh-Hoang Nguyen & Quan-Hoang Vuong, 2021. "A Systematic and Critical Review on the Research Landscape of Finance in Vietnam from 2008 to 2020," JRFM, MDPI, vol. 14(5), pages 1-24, May.
    4. Vo, Xuan Vinh, 2017. "Determinants of capital structure in emerging markets: Evidence from Vietnam," Research in International Business and Finance, Elsevier, vol. 40(C), pages 105-113.
    5. Le Ha Thi Thu, 2020. "The Impact of Auditor Specialization and Banks’ Listing Status on Earnings Management in Vietnamese Commercial Banks," Asian Journal of Law and Economics, De Gruyter, vol. 11(1), pages 1-16, April.
    6. Jonathan Batten & Xuan Vinh Vo, 2019. "Liquidity And Firm Value In An Emerging Market," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(02), pages 365-376, March.
    7. Le, Ha Thi Thu & Tran, Ha Giang & Vo, Xuan Vinh, 2021. "Audit quality, accruals quality and the cost of equity in an emerging market: Evidence from Vietnam," International Review of Financial Analysis, Elsevier, vol. 77(C).
    8. Xuan Vinh Vo, Thi Tuan Anh Tran and Van Thang Nguyen, 2020. "Investigating the Economic Relationship between Provinces in Vietnam:A Spatial Regression Approach," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 45(1), pages 47-60, March.
    9. Xuan Vinh Vo, 2023. "Large Shareholders And Information Asymmetry In A Transition Economy €“ Evidence From Vietnam," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 68(05), pages 1551-1567, September.

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