ASSIGNMENT REPORT STUDY THE IMPACT OF GOLD, OIL, GAS PRICE AND EXCHANGE RATE ON VN INDEX 2001 2021

FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS=====000===== ASSIGNMENT REPORT STUDY THE IMPACT OF GOLD, OIL, GAS PRICE AND EXCHANGE RATE ON VN-INDEX 2001-2021... The HoChi M

FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS

=====000=====

ASSIGNMENT REPORT STUDY THE IMPACT OF GOLD, OIL, GAS PRICE AND EXCHANGE RATE

ON VN-INDEX 2001-2021

INTRODUCTION 5

CHAPTER 1: RESEARCH OVERVIEW 6

1.1 Overview of stock market 6

1.2 VN-Index 6

1.3 Formula 8

1.4 Factors affecting the VN-index used in the report 8

1.4.1 Gold price 8

1.4.2 Oil price 9

1.4.3 Exchange rate 9

1.4.4 Gas price 10

CHAPTER 2: RESEARCH METHOD 11

2.1 Research method and data 11

2.1.1 Research method 11

2.1.2 Data description 11

2.2 Building model 12

2.2.1 The population regression function model 12

2.2.2 Sample regression function model 12

2.2.3 Data description of the model 12

2.2.3.1 Statistics description 12

2.2.3.2 Matrix correlation between variables: 12

CHAPTER 3: ESTIMATED MODEL AND STATISTICAL INTERFERENCES 15

3.1 Initial estimated model 15

3.2 Testing and fixing problems of the model 16

3.2.1 Model testing 16

3.2.1.1 Test the statistical significance of the regression coefficients 16

3 2.1.2 Testing the suitability of the model 16

3.2.1.3 Testing Ramsey RESET’s test 18

3.2.1.4 Testing Heteroscedasticity 19

3.2.1.5 Testing multicollinearity 21

3.2.1.6 Testing autocorrelation 23

3.2.2 Fixing the problems of the model 24

3.3 Hypothesis testing 26

3.3.1 Hypothesis testing of regression coefficient 26

3.3.2 Test the statistical significance of the regression coefficients 26

3.3.3 Test the suitable of the model 26

LIST OF TABLE

Table 1 Data description 11

Table 2 Statistics description 13

Table 3 Matrix correlation between variables 13

Table 4 Results of initial regression parameters 15

Table 5 Results of the initial estimated coefficients 15

Table 6 Regression model after removing lnoil variable 17

Table 7 Ramsey’s reset test results 18

Table 8 Heteroscedasticy result by White test 19

Table 9 Robust test 20

Table 10 Multicollinearity test results by vif 20

Table 11 The regression model after removing lnExr 21

Table 12 Breusch-Godfrey Autocorrelation Test 22

Table 13 Regression with Newey-west standard errors 25

The stock market plays an extremely important role in the economic development of

a country Stocks and stock markets are measures of the strength of the economies ofmany countries around the world Indicators or stock prices help to show the health of acountry's economy Vietnam's stock market has developed rapidly in recent years The HoChi Minh City Securities Center (the forerunner of the Ho Chi Minh City Stock Exchange,

or HOSE) held its first trading session in July 2000, marking the birth of Vietnam’ssecurities market Two decades later, the market has affirmed its role as an effectivecapital mobilising channel for the economy, contributing significantly to the equitisation

of State-owned enterprises (SOEs), together with the bank's credit system to create a moreefficient and balanced Vietnamese capital market structure that support the development

of an entire economy The stock market is affected by many factors at once No singlefactor can affect the stock market Instead, many factors come together to form an overallinvestment environment and impact the stock market Therefore, to predict the future ofthe stock market, the impact of macroeconomic factors on the stock market needs to becarefully analyzed Understanding the relationships between these variables and the stockmarket index assists investors in making investment decisions and helps policymakers indesigning policies in order to maintain market stabilization

For the reasons stated above, as well as a desire to get a better grasp of economicchallenges in the stock markets, we investigate the issue of "Factors Affecting VN-indexfrom 2001 to 2021" in order to examine macro factors affecting the VN-Index stock and,

as a result, providing suggestions for macroeconomic development and improvement ofmanagement policies in Vietnam

1 Objectives of the study

The essay aims to understand and clarify the factors affecting the stock market ofVietnam in the period 2001-2021; namely: oil price, gas price, gold price and exchangerate; from there, evaluating the influence of these factors on the VN-Index To achieve the

above goal, the research team has read and researched the previous topic and related theories and tested these theories in the field.

Research object: Factors affecting the VN-Index, specifically: oil price, gas price, gold price and exchange rate

Research scope of time: From January 2001 to October 2021

Research scope of space: Vietnam

3 Limitations and difficulties in conducting research.

During the research process, due to lack of experience and knowledge, the essay hasnot been able to analyze all aspects of the problem in depth Moreover, the stock market isalso affected by many other factors but adding new variables to the model can cause manydefects and make the verification process more difficult and complicated Therefore, welook forward to receiving your suggestions to improve the essay

The essay consists of 3 chapters

Chapter 1: Research overview

Chapter 2: Building model

Chapter 3: Statistical evaluation and analysis results

CHAPTER 1: RESEARCH OVERVIEW

1.1 Overview of stock market:

Stock market is a place where shares of public listed companies are traded Theprimary market is where companies float shares to the general public in an initial publicoffering (IPO) to raise capital A stock exchange facilitates stock brokers to tradecompany stocks and other securities A stock may be bought or sold only if it is listed on

an exchange Thus, it is the meeting place of the stock buyers and sellers

A stock market index, also known as a stock index, measures a section of the stockmarket In other words, the index measures the change in the share prices of differentcompanies

The stock index is determined by calculating the prices of certain stocks (generally aweighted average) It is a tool widely used by financial institutions and investors tocompare the return on specific investments and to describe the market, help track markettrends and measure changes

Currently, methods such as the Passcher method, Laspeyres method, Fisher averageprice index method, simple average digital method, and simple geometric average methodare widely used in generating stock price indexes The VN-Index is an index that has asignificant impact on investor psychology For this research, we will use VN-index torepresent the Vietnamese stock market

1.2 VN-Index:

The VN-Index is aggregated and calculated based on the daily price movements of allcompanies listed on the Ho Chi Minh Stock Exchange Ho Chi Minh City (HOSE) Vn-Index is used to analyze and evaluate market volatility and help investors make investmentdecisions City Securities Trading Center Ho Chi Minh City Stock Exchange (HOSE) isthe first centralized securities trading organization in Vietnam and held the first tradingsession on July 28, 2000, marking the official birth of the Ho Chi Minh Stock Exchangesecurities (stock market) in Vietnam

1.3 Formula:

VN-Index = (CMV / BMV) x 100

CMV = ∑pit x qitBMV = ∑pio x qioContain :

- CMV: The current market capitalization

- BMV: The value of the market capitalization - is adjusted in cases such as new listing, delisting and cases of change in listed capital

- pit: The price of stock i at the time of calculation

- qit: The listed volume of stock i at the time of calculation

- pio: The price of stock i at the base time

- qio: The listed volume of stock i at the base time

1.4 Factors affecting the VN-index used in the report

In fact, the VN Index is affected by many factors However, for knowledge, ourability to gather and find information is limited, so in this report, we just focus on fewmacroeconomic variables to consider the correlation: oil price, gas price, gold price andexchange rate

1.4.1. Gold price

Gold is a precious metal, used in jewelry, medicine, and industry Gold has high chemicalstability with a shiny appearance Pure gold has high ductility, is easy to be laminated into foiland spun, so it is very suitable for making jewelry, components and electronic circuits.With itspreeminent and widely recognized properties, gold has become a special material in the form

of a commodity - currency When playing the role of money, gold has had all the functions of

such full functions, including the function of means of payment, a measure of value andmeans of storage Traditionally, gold has been an indicator of future inflation, acted as ahedge against inflation, an important asset in portfolio allocation and has shown its role incrises, because gold creates a hedge to diversify the increasing risk in the market duringthe crises Central banks and international financial institutions retain a large amount ofgold for diversification, and economic security.

1.4.2. Oil price:

Oil is one of the very important input materials of most industries in the economy andhas a direct impact on the economy as well as the stock market in countries Studies in theworld have shown that oil price is a factor affecting macro variables and profitability onthe stock market through analyzing the impact of oil prices on industries and inflation inthe economy (Hamilton, 1983; Burbridge and Harrison, 1984; Gisser and Goodwin, 1986;Ciner 2001; Miller and Ratti, 2009) Vietnam has the second largest oil reserves in EastAsia, after China With export turnover accounting for an increasingly high proportion ofcrude oil, oil price is increasingly important for the economy as well as the stock market ofVietnam

Oil prices can affect stock market volatility, both directly and indirectly The directeffect can be explained by the volatility of oil prices creating uncertainty in financialmarkets, which in turn leads to a decline in the prices of securities The indirect effect ofoil prices is described through a decrease in production output and an increase in the rate

of inflation when oil prices rise This affects the macro variables of the economy andthereby affects the stock market

1.4.3. Exchange rate:

An exchange rate is the value of the US dollar against other currencies The value ofthe dollar is caused and reflected by interest rates, and interest rates are very much related

to stock prices Therefore, the exchange rate will affect the stock market and can be used

to predict the market Some studies have eased symmetric assumptions and found supportfor the asymmetric effect of exchange rate changes on stock prices (Bartram, 2004; Hsu etal., 2009; Koutmos & Martin, 2003; Miller & Reuer, 1998; Nguyen & Do, 2020) The

exchange rate can have two different effects on stock prices When the exchange rate rises

in a direct manner, the local currency is lost, as well as the stable investment climate thatattracts more capital from international investors seeking profit and price discrepancy inthe country The stock market, on the other hand, suffers as a result of the increasedexchange rate When the exchange rate is adjusted, it has an impact on exports, which has

an indirect impact on the company's economic growth and manufacturing operations,reducing stock prices

1.4.4. Gas price

Gas prices indirectly, rather than directly, affect stock markets Increases in naturalgas prices appear to impact industrial manufacturing growth, which, in turn, influencesstock prices An increase in the price of an imported commodity such as crude oil andgasoline will increase the input costs of the economy, increasing pressure on prices Pricepressure increases, while earnings are not expected to improve, will adversely affect GDPgrowth momentum.On the other hand, the increase in the import price of crude oil andgasoline of all kinds also contributed to the increase in the trade deficit, thereby puttingpressure on the VND/USD exchange rate

CHAPTER 2: RESEARCH METHOD

2.1 Research method and data:

2.1.1 Research method

- Quantitative research

- Run the software STATA regression model by least squares estimator to analyze and findthe dependency relationship of a variable called the dependent variable on one (or more variables)called independent variables to predict the outcome based

on known values of the variable

2.1.2 Data description:

The data used in the study are secondary data, collected through sources available

on the internet The data type is time series data from January 2001 to October 2021

Information about the variables used in the model is described below:

- Therein:

o Independent variables: gold price, gas price, oil price and exchange rate

2.2 Building model:

2.2.1 The population regression function model:

(PRF): ln(VNI) = 0+ 1.ln(gold) + 2.ln(oil) + 3.ln(gas) + 4.ln(Exr) +

0: intercept

1: partial slope of ln(gold)

2: partial slope of ln(oil)

3: partial slope of ln(gas)

4: partial slope of ln(Exr): random error

2.2.2 Sample regression function model:

(SRF): ln(VNI) = 0+ 1.ln(gold) + 2.ln(oil) + 3 ln(gas) + 4.ln(Exr) +

Table 2 Statistics description

2.2.3.2 Matrix correlation between variables:

Before running the regression model, we consider the degree of correlation betweenvariables using the corr command We obtained the correlation table between the variables

as follows:

Table 3 Matrix correlation between variables

Based on the correlation coefficient matrix, we can see:

Analyze the correlation between independent variables and the dependent variable:

• Regarding the direction of correlation:

- The variables: lngold, lnExr, lnoil have a positive correlation coefficient, showing the same directional impact on the dependent variable

- The variable: lngas has a negative correlation coefficient, indicating the opposite effect on the dependent variable (-0,3176)

- The correlation coefficient between lngold variable and lnVNI is the strongest, at 0,7319

- The correlation coefficient between lngas variable and lnVNI is the loosest, at - 0,3176

- In general, the correlation coefficient of the dependent variables and the

independent variable is in acceptable range

Analyze the correlation between the independent variables:

• Regarding the direction of correlation:

- In general, the variable lngold, lnExr, lnoil has the same direction of correction Thevariable lngas is negatively correlated with the other variables

• Regarding the magnitude:

- In general, the correlation coefficients between the independent variables are not high (< 0.8) But there is a relatively high correlation coefficient between lnExr and lngold (0.9092 > 0.8) That is, the change in the exchange rate is significantly associated with the gold price change

CHAPTER 3: ESTIMATED MODEL AND STATISTICAL INTERFERENCES

3.1 Initial estimated model:

Estimated model of regression coefficients according to the method of least squares (OLS) as follows:

Table 4 Results of initial regression parameters

Table 5 Results of the initial estimated coefficients

● From the above results, the regression model with estimated coefficients is:

ln(VNI) = -14,32015 + 0,2873182.ln(gas) - 0,093978.ln(oil) + 1,1574141.ln(exr) + 0,4403601.ln(gold) +

Meaning of related parameters:

● Residual Sum of Squares (RSS) = 35.3938869, this is the sum of the squares residuals (deviations) that cannot be explained by the model

● The F(4; 245) test is used to test the fit of the regression function with degrees of freedom

of the interpreted part ESS as k = 4; degrees of freedom of the part