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The Risk-Return Trade-Off in a Liberalized Emerging Stock Market: Evidence from Vietnam

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  • Kuangnan Fang
  • Ji Wu
  • Cuong Nguyen

Abstract

We empirically examine the risk-return trade-off in a liberalized emerging stock market: Vietnam during the period 2007–2014. We find that (1) neither realized idiosyncratic volatility nor conditional idiosyncratic volatility has been priced; (2) rational multifactor models could well explain the stock portfolio returns; (3) there is a flat trend for equal-weighted idiosyncratic volatility (IVOL), but a downward trend for market volatility. Our results indicate that the idiosyncratic risk plays an unimportant role in pricing stocks and that the systematic risks still dominate asset returns in emerging stock markets. Results imply that Vietnamese investors can get increased benefit from portfolio diversification.

Suggested Citation

  • Kuangnan Fang & Ji Wu & Cuong Nguyen, 2017. "The Risk-Return Trade-Off in a Liberalized Emerging Stock Market: Evidence from Vietnam," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(4), pages 746-763, April.
    • Handle: RePEc:mes:emfitr:v:53:y:2017:i:4:p:746-763
    DOI: 10.1080/1540496X.2015.1103129
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    Cited by:

    1. Nina Ryan & Xinfeng Ruan & Jin E. Zhang & Jing A. Zhang, 2021. "Choosing Factors for the Vietnamese Stock Market," JRFM, MDPI, vol. 14(3), pages 1-23, February.
    2. Nguyen, Cuong & Hoang, Lai & Shim, Jungwook & Truong, Phuong, 2020. "Internet search intensity, liquidity and returns in emerging markets," Research in International Business and Finance, Elsevier, vol. 52(C).
    3. Cesario Mateus & Bao Trung Hoang, 2021. "Frontier Markets, Liberalization and Informational Efficiency: Evidence from Vietnam," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(4), pages 499-526, December.
    4. Azra Zaimovic & Adna Omanovic & Almira Arnaut-Berilo, 2021. "How Many Stocks Are Sufficient for Equity Portfolio Diversification? A Review of the Literature," JRFM, MDPI, vol. 14(11), pages 1-30, November.

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