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

Author

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  • To Trung Thanh

    (National Economics University)

  • Le Thanh Ha

    (National Economics University)

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.

Suggested Citation

  • To Trung Thanh & Le Thanh Ha, 2025. "An application of a R2 dcomposed linkage method to explore a comtemporal and lead connectedness between investor sentiment and exchange rate dynamics in vietnam," Quality & Quantity: International Journal of Methodology, Springer, vol. 59(1), pages 231-259, February.
    • Handle: RePEc:spr:qualqt:v:59:y:2025:i:1:d:10.1007_s11135-024-01979-7
    DOI: 10.1007/s11135-024-01979-7
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    More about this item

    Keywords

    Investor sentiment; Exchange rate volatility; Vietnam; Uncertain times; A R2 decomposed linkage method;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • H1 - Public Economics - - Structure and Scope of Government

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