1. 1. VIETNAM STOCK MARKET: HOW STOCK RETURNS RESPONSE TO EVENT ANNOUCEMENTS By: Vu Duy Bang Nguyen Thanh Nam Nguyen Quynh Anh Mac Thi Huong Intake: MEBF6-HCM A Thesis Submitted to CFVG University Paris Dauphine ESCP-EAP In partial fulfillment of the requirements for the degree of MASTER IN ECONOMICS OF BANKING AND FINANCE Hochiminh City, June 2010
2. 2. Authorization We hereby declare that we are authors of the thesis. We authorize CFVG to lend this thesis to other institutions or individuals for the purpose of scholarly research. We further authorize CFVG to reproduce the thesis by photocopying or by other means, in total or in part, at the request of other institutions or individuals for the purpose of scholarly research. _________________________ _________________________ Vu Duy Bang Nguyen Thanh Nam _________________________ _________________________ Mac Thi Huong Nguyen Quynh Anh
3. 3. ABSTRACT A Thesis Submitted in Partial Fulfillment of the Requirements for the Degree of The Master in Economics of Banking and Finance to CFVG Students Name: Vu Duy Bang Nguyen Thanh Nam Nguyen Quynh Anh Mac Thi Huong Title: Vietnam Stock Market: How Stock Returns Response to Event Announcements Date: 25 June 2010 This event study focuses on how Vietnamese stock price return responses to earning announcement and right issue announcement. Market model is employed to extract abnormal return during the pre and post period of the official announcement date. For the total of 231 observations, we found that for positive earning and right issue, there is meaningful abnormal return accumulated about 20 days before the official announcement date. This shows information leakage as rumors is common in Vietnam stock market. In contrast, negative earning event does not exhibit negative abnormal return during pre period due to short selling is not allowed. Post abnormal return for positive earnings is also more substantial than that of negative earnings. For right issue, cash dividend shows higher abnormal return compared to that of share issue except for share issue with high ratio.
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5. 5. CONTENTS INTRODUCTION.....................................................................................................................2 CHAPTER 1: BACKGROUND................................................................................................3 1. Empirical theories..........................................................................................................3 2. Models for Measuring Normal Performance (3) .............................................................5 3. Market Efficiency in Capital Market.............................................................................8 4. Vietnam Stock Market Overview..................................................................................9 CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING..............................16 1. Study methodology......................................................................................................16 2. Events to be studied in this paper.................................................................................17 3. The Population and The Sample..................................................................................18 4. Define and categorize the events.................................................................................20 5. Sampling interval and time line...................................................................................22 6. Parameters computation...............................................................................................23 CHAPTER 3: FINDINGS AND ANALYSIS.........................................................................28 1. Aggregation of abnormal return over time CAR.....................................................28 2. CAR sensitivity by compound ratios:..........................................................................33 3. Density chart of CAR over PRE period.......................................................................34 4. Density chart of CAR over POST period.....................................................................35 5. Density chart of PRE CAR by event type....................................................................37 6. Density chart of POST CAR by event type.................................................................39 7. Chart of distribution function of PRE CAR.................................................................41 8. Chart of distribution function of POST CAR..............................................................43 CHAPTER 4: CONCLUSION................................................................................................45 APPENDIX I...........................................................................................................................46 APPENDIX II..........................................................................................................................47 APPENDIX III.........................................................................................................................67
6. 6. Vietnam Stock Market: How Stock Returns Response to Event Announcements 2 INTRODUCTION This paper examines the impact of selected events on stock prices in Vietnam stock market. Event studies have been considered as an essential part of empirical research in finance and other areas. Regarding the relationship between share prices and information release, there are various event studies have been taken over years for both well-developed markets (the UK, the US etc) or emerging markets (India, Malaysia, China). We realize that there is no pertinent paper available for now that studies how stock prices react to event announcements in Vietnam stock market after ten years of operation. With limitation of data, our aim is to assess and discuss about the impact of some economical events on stock prices using statistical survey method as well as with theoretical assumptions in Vietnam market context. The paper is organized as follows: chapter 1 mentions background of the study by reviewing literature and Vietnam stock market overview, chapter 2 states study methodology and data processing, chapter 3 presents our findings, chapter 4 is conclusion for the study.
7. 7. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock Returns Response to Event Announcements 3 CHAPTER 1: BACKGROUND 1. Empirical theories Event studies examined the behavior of stock prices on corporate events (1) . Many literatures of event studies was researched over the past several decades and become an important part of financial economics. In a corporate context, the usefulness of event studies from the fact that magnitude of abnormal movement at the time of events provided a measure of the impact of these events on the wealth of the firm. Event studies are the most successful uses of econometrics in policy analysis. The methodology, which studies the movement of stock prices due to specific events were originally developed to test the hypothesis that the stock market was efficient-that publicly available information is impounded immediately into stock prices such that an investor can not earn abnormal profits by trading on the information after its release. The event study methodology is well-accepted and extensively used in finance. Events study results have been used in several hundreds scholarly articles in leading (1) We focus on event studies on the mean stock price effects. Others types of event studies such as return variances (Beaver, 1968 and Patell, 1976), trading volume (Beaver, 1968 and Campbell and Wesley, 1996), operational performance (Barber and Lyon, 1996) are not mentioned on this research.
8. 8. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock Returns Response to Event Announcements 4 academic finance journals to analyze corporate finance issues, such as stock repurchases and stock split and the relation between stock prices and accounting information, by examining the impact of earnings release. Event studies serve the important goal in capital market research as a way of testing market efficiency. Systematically non-zero abnormal returns that persist after a particular type of corporate events are in consistent with market efficiency. Theories concerning to dividend payout (2) were based on Miller and Modigliani (1961) argued that the share price is independent of dividend policy the value of a share reflects both the future cash flow stream and future growth opportunities. MM acknowledged the dividend changes influence stock price and attributed this phenomenon to the information content of dividends. A stock price change resulting from a change in dividend payout because of the informational content of dividends represents differences in the private information known by corporate managers and the information available to the public. The results of early empirical attempts to support the information content of dividend hypothesis are ambiguous. Separate studies by Fama (1969), Pettit (1972, 1976), Griffen (1976) and Laub (1976) showed positive (negative) excess returns accruing following unexpected dividend increases (decreases). Work by And (1975) and Gonedes (1978) failed to support the premise, whereas Watts (1973) found that transaction costs preclude excess return capture by market participants. Charest (1978) reported that earnings announcement and dividend announcement effects are confounded. Inconsistencies in the results can be traced to differences in data, sample period, methods of analysis, and model misspecification. (2) George M. Frankfuter and Bob G. Wood with James Wansley, 2003, Dividend Policy Theory and Practice, Elsevier Science
9. 9. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock Returns Response to Event Announcements 5 Supported by cash flow signaling theory, Bhattacharya, (1979, 1980) extended the model to a two-period inter-temporal setting, whereas Talmor (1981) expanded it to a multivariate model with several valuation parameters and signaling mechanisms. In their extension of the model, Makhija and Thompson (1986) defined the least profitable firm differently than Bhattacharya (1979). If all firms have nonzero earnings, the dividend/earnings relation will be nonlinear. To ensure equilibrium existence, the dividend policy of the most profitable firms must be constrained and additional limiting conditions likely have to be imposed. John and Williams (1985) developed a signaling model with multiple equilibriums using the assumption that firms with unique private information will receive varied marginal benefits following changes in dividend policy. There are many theories about stock split such as such as Dolley (1933) examined the price the price effects of stock splits, studying nominal price changes at the time of the split. Myers and Bakay (1948), Barker (1956, 1957, 1958) and Ashley (1962) are examined of studies during time period. In the late 1960s, seminal studies by Ball and Brown (1968) and Fama, Fisher, Jensen and Ball and Brown considered the information content of earnings. 2. Models for Measuring Normal Performance (3) 2.1 Statistical models Model from statistical assumption concerning the behavior of asset returns and do not depend on any economic arguments. In contrast, models in the second category rely ___________________________________________ (3) John Y. Campbell/Andrew W. Lo/A. Craig MacKinlay 1997, The econometrics of Financial Markets, Princeton University Press, Princeton, New Jersey
10. 10. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock Returns Response to Event Announcements 6 on assumptions concerning investors behavior and are not based solely on statistical assumptions. It should, however, be noted that to use economic models in practice it is necessary to add statistical assumptions. Constant-Mean-Return Model Let i the ith element of , the mean return for asset i. Then the Constant-Mean- Return Model is: Rit = i + it E[it ] = 0 Var [it ] = 2 Where: Rit : the ith element of Rt, is the period-t return on security i it : the disturbance term 2: the (I,i) element of Although the constant-mean-return model is perhaps the simplest model, Brown and Warner (1980, 1985) find it often yields results similar to those of more sophisticated models. This lack of sensitivity to the model choice can be attributed to the fact that the variance of the abnormal return is frequently not reduced much by choosing a more sophisticated model. Market Model The market model is a statistical model which relates the return of any given security to the return of the market portfolio. The models linear specification follows from the assumed joint normality of asset returns. For any security i we have:
11. 11. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock Returns Response to Event Announcements 7 Rit = i + iRmt + it E[it] = 0 Var[it] = 2 Where: Rit, Rmt are the period-t returns on security i and the market portfolio. it: the zero-mean disturbance term i, i and 2: the parameters of the market model The market model represents a potential improvement over the constant-mean-return model. By removing the portion of the return that is related to variation in the markets return, the variance of the abnormal return is reduced. This can lead to increased ability to detect event effects. The benefit from using the market model will depend upon the R2 of the market model regression. Other statistical models A number of other statistical models have been proposed for modeling the normal return. A general type of statistical model is the factor model. Factor models potentially provide the benefit of reducing the variance of the abnormal return by explaining more of the variation in the normal return. Sometimes limited data availability may dictate the use of a restricted model such as the market-adjusted-return model. This model can be viewed as a restricted market model with i constrained to be 0 and i constrained to be 1. 2.2 Economic models Economic models restrict the parameters of statistical models to provide more constrained normal return models. Two common economic models which provide
12. 12. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock Returns Response to Event Announcements 8 restrictions are the Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory (APT). The CAPM was commonly use in event studies during the 1970s. During the last ten years, however, deviations from the CAPM have been discovered and this casts doubt on the validity of the restriction imposed by the CAPM on the market model. Some studies have used multifactor normal performance models motivated by the APT. The APT can be made to fit the cross-section of mean returns, so chosen APT model does not impose false restrictions on mean returns. On the other hand, the use of the APT complicates the implementation of an event study and has little practical advantage relative to the unrestricted market model. There seems to be no good reason to use an economic model rather than a statistical model in an event study. 3. Market Efficiency in Capital Market The simplest but economically reasonable statement of market efficiency hypothesis is that security prices at any time fully reflect all available information to the level in which the profits made based on the information do not exceed the cost of acting on such information. The cost includes the price of acquiring the information and transaction fees. When the price formation in equity market satisfies the statement, market participants cannot earn unusual profits based on the available information. The origin of the Efficient Market Hypothesis (EMH) was contributed by Bachelier (1900) and the empirical research of Cowles (1933). The modern literature in economics begins with Samuelson (1965), whose contribution is neatly summarized by the title of his article: Proof that Properly anticipated prices fluctuate randomly. This classical market efficiency definition was summarized by Fama (1970), and developed at length by researchers in the field (4) ___________________________________________ (4) Cheng-Few Lee, Alice C.Lee, 2006, Encyclopedia of Finance, Springer Science - Business Media, Inc
13. 13. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock Returns Response to Event Announcements 9 Fama distinguished market into three forms: Weak-form efficiency: The information set includes only the history of process or returns itself. Semi-strong form efficiency: The information set includes all information known to all market participants (public available information) Strong-form efficiency: The information set includes all information known to any market participant (private information) The Market Efficiency Model Assumption that the condition of market equilibrium can be stated in terms of expected returns. Although there exists diversified expected return theories, they can in general be expressed as follows: E( pi,t+1) = [1 + E(ri,t+1 | It)] x pi,t Where: E : the expected value operator pi,t : the price of security i in period t ri,t+1 : the one-period rate of return on security i in the period ending at t+1 E(ri,t+1|It): the expected rate of return conditional on information (i) available in period t 4. Vietnam Stock Market Overview Introduction Along with the implementation of the equalization plan of Vietnam (started from 1991), the stock market has been established, started by establishing of Vietnam State
14. 14. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock Returns Response to Event Announcements 10 Securities Commission (SSC) in 1996, followed by the Vietnam Securities Depository and Hochiminh Stock Exchange (in 2000) and Hanoi Stock Exchange (in 2005). The Vietnam stock market, formally known as the Securities Trading Centre (STC) located in Ho Chi Minh City, was launched on July 28th 2000. At the opening trading session, only two individual stocks with a total market capitalization of VND 444,000 million (about USD27.95 million) were traded on the market. Over ten years of operation (at the end of June 2010), the number of listed companies have increased to 666 with a total market capitalization of VND703,692 billion (equal to USD37 billion), with two stocks exchanges are Hochiminh Stock Exchange (HOSE) and Hanoi Stock Exchange (HASTC). Although the market has significantly grown over the period, it is still rather thin, the market size for HOSE and HASTC is only around 40%/GDP. Organization and operation of the stock market This section briefly introduces the organization and operation of the stock market in Vietnam. Specifically, the section focuses on regulations regarding some organizations involved in the market and how the market works. The State Securities Commission (SSC) The State Securities Committee, officially established in November 1996, is responsible for the organization, development and supervision of the countrys securities market. Before February 2004, the SSC had operated as an organ directly belonging to the Prime Minister. During this period, the SSC could not well regulate the market due to some structural weaknesses. Consequently, the Prime Minister decided, on February 19th 2004, to hand over the task of managing the SSC to the Ministry of Finance. The Government hopes that the transfer would help to improve the performance of the market, which has not been performing well since its
15. 15. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock Returns Response to Event Announcements 11 establishment in July 2001. Under the new model of operation, the main functions of the SSC are as follows: Issuing, implementing and enforcing regulations and guidelines related to securities and securities markets. Organizing and managing stock trading centre in Vietnam. Receiving feedbacks for securities companies, securities advisers, securities investment funds, and securities depositaries & custodians. Training the profession for the securities industry. Stock Exchanges The Stock Exchanges are the organization under the control of the SSC. There are two stocks exchanges: (1) Hochiminh Stock Exchange (HOSE): located in Hochiminh City, for listing (but not limited to) the big firms. HOSE has the number of listed companies of 246 with a total market capitalization of VND555,831 billion (equal to USD29.2 billion) (2) Hanoi Stock Exchange (HASTC): located in Hanoi, for managing the listing (but not limited to) the small firms, the Over-The-Counter trading, and the Specific Bond Market. HASTC has the number of listed companies of 305 with a total market capitalization of VND147,600 billion (equal to USD7.8 billion) The Stock Exchanges assumes responsibilities of organizing, executing and supervising securities trading activities on the Centre. Specifically, responsibilities and rights of the STC include the followings:
16. 16. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock Returns Response to Event Announcements 12 Organizing, managing and supervising the trading of listed securities. Managing the securities trading system. Managing and supervising the listing of securities. Managing and supervising the information disclosure activities of listed companies. Managing and supervising activities of the members of the Stock Exchanges. Organizing, managing and conducting the market information disclosure. Investment Banking Corporation By regulation, Investment Banking Corporation can be established in either joint- stock or limited liability ones. Moreover, the main businesses of the Investment Banking Corporation could consist of brokerage, investment, asset management, underwriting, and financial and securities investment advisory. Investment Banking Corporation, which are licensed by the SSC as brokers or dealers, are eligible to register as members of the stock exchanges HOSE and/or HASTC. Importantly, only members of the stock exchange have been permitted to trade securities through the trading system of the stock exchanges. Listing requirements To ensure the credibility and integrity of the stock exchanges, the Government has placed special emphasis on the overall quality of listed companies by issuing the criteria and regulations for listing. A company must comply with all of the listing requirements prior to obtaining a listing license. The qualifications for listing are as follows: Being a joint-stock company with a minimum capital of VND80 billion (for listing in HOSE) or 10billions (for listing in HASTC) Having profits in the last two consecutive years before the year of applying for listing.
17. 17. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock Returns Response to Event Announcements 13 Having the commitment made by members of the firms Board of Directors, Board of Management, and Board of Supervisors to hold at least 50% of their shares for six months from the date of listing. Having at least 100 outside investors, holding at least 20%/share capital, as for joint-stock company having share capital of VND100 billion or more, a rate of 15% is applied. Information disclosures of listed companies Listed companies are required to disclose publicly all information that is important for investors' investment decisions. The stock exchange has implemented a full disclosure policy, allowing investors to receive accurate, adequate and timely information in order to ensure market transparency and integrity. Practically, the information disclosure is conducted through the mass media or the Bulletin of the stock exchange. Listed firms information, which is obligated to disclose can be classified into two groups: regular and irregular information. Regular information includes quarterly, semi-annual, and annual financial statements. By regulation, within 10 days from the date of completing annual financial statements, listed companies have to disclose publicly their audited financial information on three consecutive issues of a national newspaper or a local newspaper at the place where the head office of a listed company is located or on the Bulletin of the Stock Exchanges. For the quarterly and semi-annual financial statements, listed companies have to disclose them within five days from the date of completion on the Bulletin of the Stock Exchanges. Irregular information consists of any information related to events that happen irregularly and should affect investors decisions. The listed companies are required to disclose information within 24 hours from the occurrence of any of the following events:
18. 18. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock Returns Response to Event Announcements 14 Having significant changes in conditions for its business activities. Suffering from a loss equivalent to or more than 10 percent of its equity The listed company, its member(s) of the Board of Directors, member(s) of the Board of Management, Board of supervisors, and Chief Accountant being prosecuted by the legal authority, being convicted by a court concerning operations of the company; and violating tax laws as stated by the tax authority Having changes in business strategy and scope. Having decisions on expanding its business activities, an investment worth 10 percent or more of another companys equity, or buying or selling fixed assets worth 10 percent or more of its equity. Falling into bankruptcy situation, making a decision on corporate merge and acquisition, split, and dissolution. Signing a loan agreement or issuing bond, which worth 30% or more of its equity. Changing the Chairperson of the Board of Directors, or more than one-third of the members of the Board of Directors, or Director (General Director); approving of the resolutions of shareholders meeting. Having other events that may considerably affect the share price or investors benefits. Stock split, additional issuance to increase its share capital Issuing bonus shares or share dividends, which is worth more than 10 percent of the equity Applying for de-listing. Foreign participation Foreign investors (institutions and individuals) can buy or sell shares on the Vietnam Stock Exchanges through investment banking corporation. However, their ownership (aggregation ownership of all foreign investors) in a listed firm is limited to 49 percent of the share capital, especially in case of banking sector this ratio is only 30
19. 19. CHAPTER 1: BACKGROUND Vietnam Stock Market: How Stock Returns Response to Event Announcements 15 percent. In addition, foreign investors who wish to participate on the stock exchange are required to register through a licensed custodian who holds shares on behalf of foreign investors. Currently, three foreign banks (the Hong Kong and Shanghai Banking Corporation, Deutsche Bank AG and Standard Chartered Bank) have licensed by the SSC to provide custodian services for foreign investors. Once registered, a securities transaction code is issued to the foreign investor who may then open a trading account with one or more of the thirteen Investment Banking Corporations for trading securities on the Stock Exchange. Moreover, foreign securities business institutions are allowed to buy shares of securities and/or investment fund management companies, or contribute capital to establish a newly joint-venture securities and/or investment fund management companies with Vietnamese partners. However, the proportion of capital contribution by foreign partners in a joint-venture is not more than 49 percent of the firms share capital. Vietnam stock market has its characteristics as following: Market size is around 40% GDP. Legal framework is not developed enough. Derivatives are not allowed in Vietnam stock markets that lead to many investors activities are performed not by laws. Regulated band for maximum daily price change in trading, they are 5% and 7% for HOSE and HASTC respectively.
20. 20. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam Stock Market: How Stock Returns Response to Event Announcements 16 CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING 1. Study methodology Our target is to find the stock prices (or firm values) behavior prior to and after selected economic event announcements in Vietnam stock market. This can be reflected through distribution of the sample data parameters and we can understand that characteristic of the market in term of event announcements. Below process will be gone through: To define the event types to be studied and its reasons. To scan data and determine criteria to select sample that presents the population. To categorize the event. To determine sample interval and event window. To compute necessary parameters of the sample with assumption of Vietnam market model and use Visual Basic Application (VBA). Results: descriptive analysis 1. Aggregation of abnormal returns over time: all event window and pre- event versus post-event period 2. Cumulative abnormal returns sensitivity to compound ratios: 3. Density chart of aggregated abnormal returns over pre-event period 4. Density chart of aggregated abnormal returns over post-event period 5. Density chart of pre-event aggregated abnormal returns by event type 6. Density chart of post-event aggregated abnormal returns by event type 7. Distribution function chart of pre-event aggregated abnormal
21. 21. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam Stock Market: How Stock Returns Response to Event Announcements 17 8. Distribution function chart of post-event aggregated abnormal Conclusion 2. Events to be studied in this paper There are many event announcements may influence the company value. They can be finance-related events such as earnings announcement, dividend payout, share split; M&A; or firms activity-related events such as management team change, firms legal case; or regulatory-related event such as changes in regulations, change in political institutions. In this paper our team limits the study in events that much relation to corporate finance of listed firms including: Financial reports announcement; Dividend announcement; Stock issuance to existing shareholder announcement: Non-conditional: Stock issuance without additional capital contribution Conditional: Stock issuance with additional cash contribution of VND10,000 per each The reason for our choice is they are all economic events and are considered as firms operation output, firms operational efficiency instead of social events that seems to be uncontrollable. As a result we can use events to measure major change in endogenous value of the listed firms. Specific to Vietnam market, a listed company may discretionary announce cash dividend payout, or share dividend right, or stock split right to existing shareholders from time to time. For stock issuance to shareholder, there may be a condition of additional pay at face value or not. We therefore standardize these kinds of
22. 22. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam Stock Market: How Stock Returns Response to Event Announcements 18 shareholder benefit to a comparable unit and treat relative events as a homogeneous event type called right issue. In summary our studied events are periodic earnings statement release and right issue announcement. 3. The Population and The Sample The population is above mentioned events occurred in Vietnam stock market that leaded to changes in price of stocks listed in two stock exchanges HOSE and HASTC. At the moment there are 666 stocks are listed in Vietnam stocks market. During nearly ten years of operation to date, Vietnam market has 66 stocks being listed each year in average. To have a typical sample in Vietnam stock market environment, we have to find a solution that enables us to choose stocks those: are comparable in term of maximum daily price change (trading band); are comparable in term of time horizon; include both events being investigated; represent all firms across over market capitalization size, business sectors; have the high traded volume in average so stocks liquidity is considered mainly decided by demand versus supply relationship. The solution is setting some criteria as follows: 1. To avoid dispute on return computation by skipping the affect of different daily price band between two floors: choose HOSE listed stocks only;
23. 23. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam Stock Market: How Stock Returns Response to Event Announcements 19 2. To choose long enough observation period: survey data over two-year time from Mar 2008 to Mar 2010; 3. To choose stocks that have been listing for more than 3 years as at Mar 2010 so its sufficient to apply beta in computation of normal and abnormal return; 4. To choose high-liquid stocks to reduce manipulation impact; 5. To choose stocks across variance business sectors: manufacturing (FMCG, steel etc), banking, services, real estate developer, infrastructure developer, constructional materials, agricultural products processing, technology, industrial property developer, oil, power, textile and garment, transportation, assets management. Data collection format: SYMBOL DATE CLOSING PRICE VOLUME ADJ CLOSING PRICE ANV 3/3/2008 69,000 66,340 60,610 ANV 3/4/2008 66,500 207,480 58,850 ANV 3/5/2008 63,500 213,560 56,190 ANV 3/6/2008 66,500 3,950 58,850 ANV 3/7/2008 69,500 173,780 61,510 ANV 3/10/2008 72,500 194,590 64,150 Source: HOSE Adjusted closing price is the price that was adjusted from historical closing price by dividing by compounded rate. This price was smooth and actually reflects stock price change though time. All subsequent computations are based on adjusted closing price.
24. 24. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam Stock Market: How Stock Returns Response to Event Announcements 20 4. Define and categorize the events 4.1 Earnings events: Each firm announces their earnings periodically. Four pieces of information are collected: the expected earnings, the event date, the actual earnings and the event definition. We started with annual plan NOPAT of the firms that adopted by its Board of Shareholders beginning of each year as the markets expected earnings. The overview of the data and sample shows that to clearly assess the impact of the earnings announcement on the market valuation of the firm we need to add 25% deviation on top of plan NOPAT to define whether the actual earnings are really good or bad compared to expected earnings. Event date is the date when the quarter financial report of the firm is released officially, i.e. the report is submitted to Hochiminh Stock Exchange. Actual earnings is reported earnings of the firm In order to examine the impact of the earnings announcement, we assign earnings announcements into two event categories: positive earnings for those exceed 125% of markets expected earnings and negative earnings for those behind 75% of markets expected earnings. 4.2 Right issue events: We collect all announcements of selected 39 firms regarding: Cash dividend payout
25. 25. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam Stock Market: How Stock Returns Response to Event Announcements 21 Share dividend Share split Share bonus Additional share issuance with condition of additional capital contribution by existing shareholders Sometimes more than one benefit above is combined in a firms announcement. Usually firm announces for shareholder benefit upon having a good earnings. Three pieces of information are collected: the event date, the benefit rate for each relative announcement, all benefits will be combined to find a compounded rate that represent shareholders benefit in each announcement. Our group names this compounded rate as right issue. In case of annual basis this compounded rate represents dividend yield of the stock. The event date is official date that firm announces the right issue. The compounded rate is to standardize the right issue rate of stocks with different trading price, different type of shareholders benefit announcement. Formula is: Right issue rate Y = Pt-1 / [(Pt-1+SI*IP-FV*CD)/(1+SD+SB+SI)] Where: Y is standardized compounded rate. This is also the rate to use to adjust closing prices of the initial data at of each relative right execution date t is the date of right issue execution date, that is usually about 10-20 trading after event date Pt-1 is closing price of stock on the date (t-1), i.e. 1 day prior to right execution date SI is rate in case share issuance to existing shareholders with additional capital contribution request
26. 26. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam Stock Market: How Stock Returns Response to Event Announcements 22 IP is issuing price, i.e. the amount in VND shareholder has to pay for each share when execute the right FV is face value of the share equal to VND10,000 in Vietnam market CD is the rate for cash dividend SD is rate for share dividend SB is the rate for share bonus or share split in case no additional capital contribution request 4.3 Sample size With mentioned assumption, our sample consists 231 events categorized into 3 types: 103 positive earnings, 78 negative earnings and 50 right issues events across over 39 selected stocks during two-year period that we strongly believe they represent population characteristic. 5. Sampling interval and time line From data collected, we set sampling interval to one day then daily return are used. We investigate the stock return over: 21-day event window that comprises of 10 pre-event days, the event day and 10 post-event days. 41-day event window that comprises of 20 pre-event days, the event day, and 20 post-event days. 61-day event window that comprises of 30 pre-event days, the event day and 30 post-event days.
27. 27. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam Stock Market: How Stock Returns Response to Event Announcements 23 We dont investigate longer event window to avoid overlap between two event windows that leads to incorrect cumulated returns. Event timeline can be illustrated as follow: | T0 || T1 || T2 | Where: | T1 | is event date | T0 | to | T1 | is pre-event period | T1 | to | T2 | is post-event period 6. Parameters computation 6.1 Actual daily stock return Ractual i, t = (Pi, t / Pi, t-1) - 1 Where: Pi, t is adjusted closing price on date t Pi, t-1 is adjusted closing price on date t-1 The numbers are pulled out from original data collected 6.2 Estimation of expected daily return - Normal daily stock return There are some approaches to compute normal return of given stocks. For simplicity, we use statistical market model as a basis to measure normal return with below assumption for samples characteristics: Firm stock returns are linear with VNIndex return at slope ;
28. 28. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam Stock Market: How Stock Returns Response to Event Announcements 24 Regardless the estimation window, the is constant for each stock during whole sample study period; We all understand that it is much complicated to define parameter i. Particularly in Vietnam stock market context, there is no sufficient data to compute . In other word, limited data availability dictates the use of adjusted market model with i constrained to be zero; If the event does not occur, it is considered zero too; Firms market capitalization portion in sample is remained unchanged or small enough that it has little effect on empirical work. Normal return is considered as markets expectation in case the event would not take place. Ri,t = i + iRm,t + i,t Where: Ri,t, Rm,t are the period-t return of stock i and of the market portfolio I,t is zero mean disturbance term i, i are parameters of market model With above mentioned assumption of i and it are zero, in this research we compute normal return by formula: Ri,t = iRm,t To be independent and with assumption of efficient market, in application a board- based stock index is used for market portfolio return and i is of stock i that market accepts as at March 2010. In this case they are VNIndex return and gathered from Bloomberg. For example the beta for stock symbol ITA is 1.139.
29. 29. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam Stock Market: How Stock Returns Response to Event Announcements 25 Associated with mentioned assumption, our formula has some limitations that may lead to slight difference in the result. Model parameters should depend on non-announcement period. In our research we eliminate and assume that is fixed. Our dictation may create correction between the event under analysis and the market return, for example a part of price variation is already reflected in ; The result of aggregation abnormal return varies according to sample size; To allow for normal changes in firms stock price relative to the market only whilst actually there are reasons for stock price movement such as firm directors change, M&A activities, competition pressure and other uncontrollable events; The event actually may not be independent of the behavior of the stock price in short, event date is endogenous 6.3 Estimation of Abnormal daily stock return due to event To assess the events impact on the stock price, we need to measure the variation of the return arising from event announcement over the event window. It interprets abnormal return by taking actual return minus expected return during the event window: ARi,t = Ractual i, t - Ri,t Where: ARi,t is abnormal return of stock i at date-t
30. 30. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam Stock Market: How Stock Returns Response to Event Announcements 26 Ractual i, t is actual return of stock i at date-t Ri,t is expected return of stock i at date-t 6.4 Aggregation abnormal returns At this stage we have to assume that abnormal returns for all stocks are independent. With this assumption, we compute abnormal return of given stocks and then aggregate them in order to draw overall inferences for the event of interest. The aggregation is along two dimensions: through time then across stocks. The first is aggregation of abnormal return through time series for individual stock over selected period within event window: this is Cumulative Abnormal Return (CAR). Since the impacts of event on the stock price are sometimes not immediately, so we must access CAR to get abnormal return over pre-defined period of time. Pre-event CAR: CARi, t0,t1 = ARi,t (t run T0 to T1) Post-event CAR: CARi, t1,t2 = ARi,t (t run from T1 to T2) Event window CAR: CARi, t0,t2 = ARi,t (t run from T0 to T2) Where: CARi is cumulated abnormal return of stock i over defined period In this paper, we do aggregate across different time period to see if the effect develops over time and to find meaningful/effective event window. The second then is aggregation through time and cross-section, i.e. aggregation of CARs of all stocks through selected period within event window: from T0 to T1 (Pre-
31. 31. CHAPTER 2: STUDY METHODOLOGY AND DATA PROCESSING Vietnam Stock Market: How Stock Returns Response to Event Announcements 27 event CAR), from T1 to T2 (Post-event CAR), or from T0 to T2 (event window CAR) then to get the Average CAR. Average pre-CAR = CARi, t0,t1 / N (i run across 39 stocks) Average post-CAR = CARi, t1,t2 / N (i run across 39 stocks) Average event window CAR = CARi, t0,t2 / N (i run across 39 stocks) Where N is the number of stocks employed in related event. 6.5 IT technique applied Our group writes VBA codes to generate all desired CAR, aggregation CAR and average aggregation CAR to demonstrate our findings (appendix II) The data after processing is illustrated as follows: SYMBOL DATE ADJ PRICE ACTUAL RETURN NORMAL RETURN=Be ABNORMAL RETURN PRECAR POSTCAR COMPOUNDED RATE EARNING (P vs N) ANV 7/24/2008 39,390 -2.86% -2.33% -0.53% ANV 7/25/2008 38,230 -2.94% -1.54% -1.41% ANV 7/28/2008 37,150 -2.83% 1.28% -4.10% -28.69% -1.17% Negative Earning ANV 7/29/2008 36,710 -1.18% 2.38% -3.56% CII 2/5/2009 14,720 -2.45% -3.17% 0.72% CII 2/9/2009 16,010 3.56% 2.31% 1.25% CII 2/10/2009 15,390 -3.87% -2.11% -1.76% CII 2/11/2009 15,030 -2.34% -2.25% -0.09% 5.32% 16.16% 1.0474 CII 2/12/2009 14,850 -1.20% -0.05% -1.15% CII 2/13/2009 14,780 -0.47% -0.63% 0.15% CII 7/15/2009 23,580 -0.84% 2.22% -3.06% CII 7/16/2009 24,480 3.82% 1.64% 2.17% CII 7/17/2009 24,350 -0.53% -1.21% 0.68% -0.83% 6.93% Positive Earnings
32. 32. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 28 CHAPTER 3: FINDINGS AND ANALYSIS 1. Aggregation of abnormal return over time CAR 1.1 CAR over event window of 61 days 15.0% 10.0% 5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 30 20 10 0 10 20 30 CAR Time Figure1.AverageCARovereventwindow groupedbyeventtype POSITIVEEARNINGS MEAN NEGATIVE EARNINGS MEAN RIGHTISSUES MEAN Trading day=0:theannouncementdate a) We aggregate abnormal return over time to see the effect of the events. An event window of 61 trading days is used to calculate the over CAR. This event window consists of 31 days PRE announcement period (including the announcement date) and 30 days POST announcement period. Then the computed CARs are averaged according to its event types.
33. 33. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 29 b) Figure 1 shows that for positive earnings and right issues announcements, the CAR start to increase about 20 days before the announcement date and continue to increase for the next 20 days after the announcement and flat out afterward. c) The increased CAR in the PRE announcement period can be attributed to information leakage. This truly reflects current situation information asymmetry in Vietnamese stock market. d) The process of this stock return behavior can be characterized as follows: Before the information is known to the public, the people who knows the information first buy the stocks (or having their relatives buy the stocks) Then they informally release the information to the public. This information is rumors. The public usually follow the rumors since they are proven to right. This is seen how the PRE CAR is accelerated. When the information is officially announced, the market continues to act on it and the effects is subsidized after about 20 trading days. e) Returns behavior on negative earnings is quite different than the positive earnings and can be summarized in the followings: There is no CAR movement during the PRE period. This is due to short selling is not allowed, thus it is difficult to take advantage of the information.
34. 34. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 30 The effect on post period is not as strong as compared to that of the positive earnings. This can be explained by the following reasons: Market in general focuses more on positive information than negative information. As mentioned above, short sell is not allowed so investors cannot make profit based on negative information. Overall, the degree of negative earnings is lesser than that of the positive the positive one. Since the determination whether the earnings is positive or negative is based on comparing the actual earnings against the companys earnings forecast. The company management tends to be more conservative so that it is easier to beat the expectation. The motivation for beating the expectation is for stock price increase, so as their bonuses and job security. The major shareholders tend to fights against downward price movements. They would use their private source of money to buy the stock when there is price downward pressure. This could be done through trading accounts under different names so transactions on these accounts would not need to notify with the exchange Committee.
35. 35. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 31 1.2 CAR separated from PRE and POST period 4% 2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 0 5 10 15 20 25 30 CAR Time Figure2.1PositiveEarning AverageCAR(PREperiodVsPOSTperiod) AverageCARoverPREperiod AverageCARoverPOSTperiod 16% 14% 12% 10% 8% 6% 4% 2% 0% 2% 0 5 10 15 20 25 30 CAR Time Figure2.2NegativeEarning AverageCAR(PREperiodVsPOSTperiod) AverageCARoverPREperiod AverageCARoverPOSTperiod
36. 36. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 32 0% 5% 10% 15% 20% 25% 0 5 10 15 20 25 30 CAR Time Figure2.3RightIssue AverageCAR(PREperiodVsPOSTperiod) AverageCARoverPREperiod AverageCARoverPOSTperiod a) To see the effects of CAR over the PRE and POST period separately, CARs for PRE period stops at the end of the announcement day. CAR for POST period is calculated from the first day after the announcement day. Figure 2.1 and figure 2.3 show that CAR is stronger during post period than pre period for positive earnings and right issue events, while the reverse is true for negative earnings as shown in figure 2.2. b) Strong POST CAR of positive earnings can be attributed to Post Earnings Announcement Drift effect presented by Bernard and Thomas (1989). c) Strong POST CAR of right issue can be partially explained that it would compensate the time value of the capital that is locked up during the right issue process. In other word, there is a share price adjustment (normally adjusted down) associated with right issue thus existing shareholders will loose the time value of the locked up capital.
37. 37. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 33 2. CAR sensitivity by compound ratios: 10% 5% 0% 5% 10% 15% 20% 25% 30% 30 20 10 0 10 20 30 CAR Time Figure3.CARSensitivityToCompoundedRatios MEANRatio11.05 MEANRatio1.051.1 MEANRatio>1.1 Figure 3 shows that right issues with low compounded ratio and high compounded ratios have strong CAR while right issues with medium compounded ratio have weaker CAR. This is due to right issue events with low compounded ratio consists of mainly cash dividends while medium and high ratio consists of share issues (including share dividend, share bonus, rights to buy). This show cash dividend is more attractive than that of share issues unless share issues with high compounded ratio. Despite the fact that cash dividend is not necessary beneficial to shareholders because of the shareholder return might be higher average market return. In this case, the company would rather not pay cash dividend since it will result a higher return than the market return. For the case of share issues, it is also not necessary positive since the effect of share dilution will result in a lower earnings per share in the future. However, the investors perception in Vietnam about cash dividend and share issues is strongly favorable.
38. 38. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 34 3. Density chart of CAR over PRE period .0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% NUMBEROFOBSERVATIONS CAR Figure3.1DensitychartofCARoverPRE11periodbyeventtype POSITIVEEARNINGS Mean:5.69% Std.Deviation:7.54% Kurtosis:1.4 Skewness:0.9 NEGATIVEEARNINGS Mean:(7.58%) Std.Deviation:6.1% Kurtosis:0.3 Skewness:1.3 RIGHTISSUE Mean:8.67% Std.Deviation:8.16% Kurtosis:1.3 Skewness:1.6 .0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 35% 30% 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% NUMBEROFOBSERVATIONS CAR Figure3.2DensitychartofCARoverPRE21periodbyeventtype POSITIVEEARNINGS Mean:12.55% Std.Deviation:8.99% Kurtosis:4.8 Skewness:2.2 NEGATIVEEARNINGS Mean:(13.67%) Std.Deviation:7.72% Kurtosis:3.7 Skewness:2.1 RIGHTISSUE Mean:10.43% Std.Deviation:8.98% Kurtosis:4.6 Skewness:2.2
39. 39. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 35 .0 5.0 10.0 15.0 20.0 25.0 30% 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% NUMBEROFOBSERVATIONS CAR Figure3.3DensitychartofCARoverPRE31periodbyeventtype POSITIVEEARNINGS Mean:11.37% Std.Deviation:11.42% Kurtosis:2.8 Skewness:1.2 NEGATIVEEARNINGS Mean:(15.24%) Std.Deviation:12.03% Kurtosis:2.0 Skewness:0.9 RIGHTISSUE Mean:11.75% Std.Deviation:14.40% Kurtosis:2.5 Skewness:1.6 Figure 3.1 shows density chart of CAR over 11 days PRE period for positive earnings, negative earnings and right issue events. Figure 3.2 and 3.3 is the same chart with CAR over 21 and 31 PRE period respectively. For all three PRE period, positive earnings event exhibits a more peak than that of the negative earnings and right issue event suggesting positive earnings event has higher probability of having CAR fall around its mean. 4. Density chart of CAR over POST period .0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% NUMBEROFOBSERVATIONS CAR Figure4.1DensitychartofCARoverPOST10periodbyeventtype POSITIVEEARNINGS Mean:0.24% Std.Deviation:8.55% Kurtosis:4.9 Skewness:2.2 NEGATIVEEARNINGS Mean:(1.27%) Std.Deviation:9.34% Kurtosis:3.8 Skewness:2.1 RIGHTISSUE Mean:4.18% Std.Deviation:8.63% Kurtosis:3.8 Skewness:2.1
40. 40. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 36 5 10 15 20 25 30 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% NUMBEROFOBSERVATIONS CAR Figure4.2DensitychartofCARoverPOST20periodbyeventtype POSITIVEEARNINGS Mean:2.65% Std.Deviation:12.59% Kurtosis:6.0 Skewness:2.3 NEGATIVEEARNINGS Mean:(0.21%) Std.Deviation:13.02% Kurtosis:2.8 Skewness:1.9 RIGHTISSUE Mean:8.26% Std.Deviation:14.33% Kurtosis:0.7 Skewness:1.3 .0 5.0 10.0 15.0 20.0 25.0 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% NUMBEROFOBSERVATIONS CAR Figure4.3DensitychartofCARoverPOST30periodbyeventtype RIGHTISSUE Mean:8.22% Std.Deviation:16.97% Kurtosis:(0.2) Skewness:1.0 NEGATIVEEARNINGS Mean:2.24% Std.Deviation:14.64% Kurtosis:(0.1) Skewness:0.7 POSITIVEEARNINGS Mean:4.38% Std.Deviation:15.83% Kurtosis:0.8 Skewness:1.4 Figure 4.1 to 4.3 are constructed the same as figure 3.1 to 3.3 but using POST period of 10, 20 and 30 days. For all three period, positive earnings event again shows a higher peak than negative and right issue. However, right issue event exhibits higher mean overall. The density chart of PRE CAR in general has higher peak than that of the POST counterpart, which indicates the mean of the PRE is more meaningful than that of the
41. 41. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 37 POST. The PRE observation has higher probably to fall near its mean compared to the POST observation. POST 20 and 30 also show a long tail on the right with CAR up to 45 50% suggests there are some events exhibits strong abnormal returns in the post period. 5. Density chart of PRE CAR by event type 0 5 10 15 20 25 30 35 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% NUMBEROFOBSERVATIONS CAR Figure5.1DensitychartofPOSITIVEEARNINGCARoverPREperiod PRECAR11 Mean:5.69% Std.Deviation:7.54% Kurtosis:1.2 Skewness:1.3 PRECAR21 Mean:12.55% Std.Deviation:8.99% Kurtosis:2.3 Skewness:1.6 PRECAR31 Mean:11.37% Std.Deviation:11.42% Kurtosis:0.8 Skewness:1.2 0 5 10 15 20 25 30 35 40% 35% 30% 25% 20% 15% 10% 5% 0% 5% 10% 15% NUMBEROFOBSERVATIONS CAR Figure5.2DensitychartofNEGATIVEEARNINGCARoverPREperiod PRECAR11 Mean:(7.85%) Std.Deviation:6.1% Kurtosis:(1.6) Skewness:0.3 PRECAR21 Mean:(13.67%) Std.Deviation:7.7% Kurtosis:0.8 Skewness:1.4 PRECAR31 Mean:(15.24%) Std.Deviation:12% Kurtosis:0.3 Skewness:0.9
42. 42. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 38 0 2 4 6 8 10 12 14 16 18 20 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% NUMBEROFOBSERVATIONS CAR Figure5.3DensitychartofRIGHTISSUECARoverPREperiod PRECAR11 Mean:8.67% Std.Deviation:8.1% Kurtosis:1.7 Skewness:1.7 PRECAR21 Mean:10.4% Std.Deviation:8,9% Kurtosis:3.4 Skewness:1.9 PRECAR31 Mean:11.7% Std.Deviation:14.4% Kurtosis:2.5 Skewness:1.6 Chart 5.1, 5.2 and 5.3 are constructed by drawing PRE CAR for positive earning, negative earnings and right issue event respectively. For positive and negative earnings events, kurtosis value of PRE 21 days are higher than that of period 11 and 31 which means the distribution of PRE 21 is more peaked than 11 and 31 period. This indicates that there are high numbers of observations which have meaningful CAR starting from 21 trading days before the announcement date. We can conclude that for a given type of event, there is abnormal return starting from about 21 days before the official announcement date. This finding confirms with the finding in section 1. For right issue event, difference between 11,21 and 31 is not as clear as for positive and negative earnings. It also exhibits a long tail of high CAR on the right.
43. 43. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 39 6. Density chart of POST CAR by event type 0 5 10 15 20 25 30 35 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% NUMBEROFOBSERVATIONS CAR Figure6.1DensitychartofPOSITIVEEARNINGCARoverPOSTperiod POSTCAR10 Mean:0.24% Std.Deviation:8.55% Kurtosis:8.3 Skewness:2.7 POSTCAR20 Mean:2.6% Std.Deviation:12.6% Kurtosis:3.8 Skewness:2.1 POSTCAR30 Mean:4.4% Std.Deviation:15.8% Kurtosis:7.4 Skewness:2.7 0 5 10 15 20 25 30 30% 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% NUMBEROFOBSERVATIONS CAR Figure6.2DensitychartofNEGATIVEEARNINGCARoverPOSTperiod POSTCAR10 Mean:(1.27%) Std.Deviation:9.3% Kurtosis:3.8 Skewness:2.1 POSTCAR20 Mean:(0.21%) Std.Deviation:13.0% Kurtosis:2.8 Skewness:1.9 POSTCAR30 Mean:2.2% Std.Deviation:14.6% Kurtosis:0.6 Skewness:1.2
44. 44. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 40 0 2 4 6 8 10 12 14 16 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% NUMBEROFOBSERVATIONS CAR Figure6.3DensitychartofRIGHTISSUECARoverPOSTperiod POSTCAR10 Mean:4.18% Std.Deviation:8.6% Kurtosis:3.2 Skewness:1.9 POSTCAR20 Mean:8.2% Std.Deviation:14.3% Kurtosis:0.3 Skewness:1.2 POSTCAR30 Mean:8.2% Std.Deviation:16.9% Kurtosis:0.2 Skewness:1.1 Chart 6.1, 6.2 and 6.3 are POST CAR for positive earning, negative earnings and right issue event respectively. For positive earnings event, there is no clear difference between 10, 20 and 30 period. The post mean is lower than the PRE mean suggesting the good news reflect on price more on PRE period than post period. For negative earnings event, post 10 show a highest peak. All the mean of all three period falls around zero indicating that bad new already reflects on price on the PRE period. For right issue, post 10 exhibits highest peak, but it has lower mean than post 20 and 30.
45. 45. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 41 7. Chart of distribution function of PRE CAR 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% ACCUMULATIVEPROBABILITY CAR Figure7.1DISTRIBUTIONFUNCTIONofPOSITIVEEARNINGSoverPREperiod PRECAR11 PRECAR21 PRECAR31 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 40% 35% 30% 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% ACCUMULATIVEPROBABILITY CAR Figure7.2DISTRIBUTIONFUNCTIONofNEGATIVEEARNINGSoverPREperiod PRECAR11 PRECAR21 PRECAR31
46. 46. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 42 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% ACCUMULATIVEPROBABILITY CAR Figure7.3DISTRIBUTIONFUNCTIONofRIGHTISSUEoverPREperiod PRECAR11 PRECAR21 PRECAR31 Figure 7.1 to 7.3 shows the accumulative distribution function of PRE CAR for positive earnings, negative earnings and right issue event respectively. For positive earnings (figure 7.1), PRE 11 shows about 50% of its sample having negative CAR suggests there is profit taking within the last 11 days before the announcement date. In other word, for about half of the observations, market tends to buy around 21 days before and take profit during the last 11 day before the announcement. Figure 7.2 shows high probability of negative PRE CAR for negative earnings event. For right issue event, figure 7.3 shows probability distribution is the same for PRE 11 and 21, while PRE 31 shows a higher probability for lower CAR and lower probability for higher CAR comparing to PRE 11 and PRE 21.
47. 47. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 43 8. Chart of distribution function of POST CAR 0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% ACCUMULATIVEPROBABILITY CAR Figure8.1DISTRIBUTIONFUNCTIONofPOSITIVEEARNINGSoverPOSTperiod POSTCAR10 POSTCAR20 POSTCAR30 0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% ACCUMULATIVEPROBABILITY CAR Figure8.2DISTRIBUTIONFUNCTIONofNEGATIVEEARNINGSoverPOSTperiod POSTCAR10 POSTCAR20 POSTCAR30
48. 48. CHAPTER 3: FINDINGS AND ANALYSIS Vietnam Stock Market: How Stock Returns Response to Event Announcements 44 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 30%25%20%15%10% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% ACCUMULATIVEPROBABILITY CAR Figure8.3DISTRIBUTIONFUNCTIONofRIGHTISSUEoverPOSTperiod POSTCAR10 POSTCAR20 POSTCAR30 Series chart from 8.1 to 8.3 are the accumulative distribution functions of POST CAR for positive earnings, negative earnings and right issue event respectively.
49. 49. CHAPTER 4: CONCLUSION Vietnam Stock Market: How Stock Returns Response to Event Announcements 45 CHAPTER 4: CONCLUSION Evidence shows abnormal return exists about twenty days before the event official announcement date due to information leakage which is channeled to the market as rumors. This market characteristic is common in emerging market where investors make their decision based on rumors which creates herd-style behavior in the market. This certainly add a new dimension of risk as corporations fundamental is weighted less than its deserved importance.
50. 50. APPENDIX I Vietnam Stock Market: How Stock Returns Response to Event Announcements 46 APPENDIX I APPREVIATIONS HOSE Hochiminh Stock Exchange HASTC Hanoi Stock Exchange SSC State Securities Committee VBA Visual Basic for Applications CAR Cumulative Abnormal Return PRE Timeline before event date POST Timeline after event date
51. 51. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 47 APPENDIX II VISUAL BASIC APPLICATION CODES THIS PROGRAM CALCULATE CAR FOR OBSERVATION, PRECAR AND POSTCAR OVER A SPECIFIED WINDOW, AND MEAN OF CAR GROUPED BY EVENT TYPE AND COMPOUNDED RATIO Sub Calculate_CAR() 'This sub calculate CARs for each observation for the specified window. Dim window As Integer 'Event window window = 10 Dim totalRows As Integer Dim arrSymbol() As String Dim arrDate() As String Dim arrAbnormalReturn() As Double Dim arrFinancialStatement() As Double Dim arrRights() As Double Dim posNoFiEvent As Integer Dim negNoFiEvent As Integer Dim noRightEvent As Integer noRightEvent = 0 posNoFiEvent = 0 negNoFiEvent = 0 Dim indexPosF() As Integer ' read when (position) the event happen Dim indexNegF() As Integer
52. 52. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 48 Dim indexRightEvent() As Integer ' Read basic Data Sheets("Data").Select Cells(4, 1).Select totalRows = Range(Selection, Selection.End(xlDown)).count 'MsgBox (totalRows) ReDim arrSymbol(totalRows) As String ReDim arrDate(totalRows) As String ReDim arrAbnormalReturn(totalRows) As Double ReDim arrFinancialStatement(totalRows) As Double ReDim arrRights(totalRows) As Double 'read Data into these array Dim i As Integer For i = 4 To totalRows arrSymbol(i) = Worksheets("Data").Cells(i, 1) arrDate(i) = Worksheets("Data").Cells(i, 2) arrAbnormalReturn(i) = Worksheets("Data").Cells(i, 10) arrRights(i) = Worksheets("Data").Cells(i, 17) arrFinancialStatement(i) = Worksheets("Data").Cells(i, 18) 'count good/bad BCTC If (arrFinancialStatement(i) = 1) Then posNoFiEvent = posNoFiEvent + 1 ElseIf (arrFinancialStatement(i) = -1) Then negNoFiEvent = negNoFiEvent + 1 End If 'count Rights If (arrRights(i) 0) Then noRightEvent = noRightEvent + 1 End If Next i 'MsgBox (noRightEvent)
53. 53. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 49 ReDim indexPosF(posNoFiEvent) As Integer ReDim indexNegF(negNoFiEvent) As Integer ReDim indexRightEvent(noRightEvent) As Integer Dim j, k, m As Integer j = 0 k = 0 m = 0 'get the position of event For i = 4 To totalRows If (arrFinancialStatement(i) = 1) Then j = j + 1 indexPosF(j) = i 'position of event ElseIf (arrFinancialStatement(i) = -1) Then k = k + 1 indexNegF(k) = i End If If (arrRights(i) 0) Then m = m + 1 indexRightEvent(m) = i End If Next i 'Calculate CAR based on estimate window - including the announment day Dim PRECAR_FI_POS() As Double Dim PRECAR_FI_NEG() As Double Dim PRECAR_RIGHTS() As Double ReDim PRECAR_FI_POS(posNoFiEvent) As Double ReDim PRECAR_FI_NEG(negNoFiEvent) As Double ReDim PRECAR_RIGHTS(noRightEvent) As Double Dim POSTCAR_FI_POS() As Double Dim POSTCAR_FI_NEG() As Double Dim POSTCAR_RIGHTS() As Double
54. 54. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 50 ReDim POSTCAR_FI_POS(posNoFiEvent) As Double ReDim POSTCAR_FI_NEG(negNoFiEvent) As Double ReDim POSTCAR_RIGHTS(noRightEvent) As Double Worksheets("Result").Cells(1, 1) = "POSITIVE FINANCIAL STATEMENT" Worksheets("Result").Cells(2, 1) = "SYMBOL" Worksheets("Result").Cells(2, 2) = "DATE" Worksheets("Result").Cells(2, 3) = "PRECAR20" Worksheets("Result").Cells(2, 4) = "POSTCAR20" Worksheets("Result").Cells(2, 5) = "PRECAR30" Worksheets("Result").Cells(2, 6) = "POSTCAR30" Worksheets("Result").Cells(2, 7) = "PRECAR10" Worksheets("Result").Cells(2, 8) = "POSTCAR10" 'Worksheets("Result").Cells(2, 9) = "PRECAR50" 'Worksheets("Result").Cells(2, 10) = "POSTCAR50" Worksheets("Result").Cells(1, 12) = "NEGATIVE FINANCIAL STATEMENT" Worksheets("Result").Cells(2, 12) = "SYMBOL" Worksheets("Result").Cells(2, 13) = "DATE" Worksheets("Result").Cells(2, 14) = "PRECAR20" Worksheets("Result").Cells(2, 15) = "POSTCAR20" Worksheets("Result").Cells(2, 16) = "PRECAR30" Worksheets("Result").Cells(2, 17) = "POSTCAR30" Worksheets("Result").Cells(2, 18) = "PRECAR10" Worksheets("Result").Cells(2, 19) = "POSTCAR10" 'Worksheets("Result").Cells(2, 21) = "POSTCAR50" Worksheets("Result").Cells(1, 23) = "RIGHTS EVENT" Worksheets("Result").Cells(2, 23) = "SYMBOL" Worksheets("Result").Cells(2, 24) = "DATE" Worksheets("Result").Cells(2, 25) = "RATE" Worksheets("Result").Cells(2, 26) = "PRECAR20" Worksheets("Result").Cells(2, 27) = "POSTCAR20" Worksheets("Result").Cells(2, 28) = "PRECAR30"
55. 55. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 51 Worksheets("Result").Cells(2, 29) = "POSTCAR30" Worksheets("Result").Cells(2, 30) = "PRECAR10" Worksheets("Result").Cells(2, 31) = "POSTCAR10" 'Worksheets("Result").Cells(2, 32) = "PRECAR50" 'Worksheets("Result").Cells(2, 33) = "POSTCAR50" Dim posStep As Integer posStep = 2 'POSITIVE EARNING For i = 1 To posNoFiEvent ' go through number of event For j = 1 To window PRECAR_FI_POS(i) = PRECAR_FI_POS(i) + arrAbnormalReturn(indexPosF(i) - j + 1) POSTCAR_FI_POS(i) = POSTCAR_FI_POS(i) + arrAbnormalReturn(indexPosF(i) + j) Next j 'writeback CAR to Data sheet Worksheets("Data").Cells(indexPosF(i), 11) = PRECAR_FI_POS(i) Worksheets("Data").Cells(indexPosF(i), 12) = POSTCAR_FI_POS(i) 'write CAR to result sheet posStep = posStep + 1 Worksheets("Result").Cells(posStep, 1) = arrSymbol(indexPosF(i)) Worksheets("Result").Cells(posStep, 2) = arrDate(indexPosF(i)) 'to change when window change 'window 20 'Worksheets("Result").Cells(posStep, 3) = PRECAR_FI_POS(i) 'Worksheets("Result").Cells(posStep, 4) = POSTCAR_FI_POS(i) 'window 30 'Worksheets("Result").Cells(posStep, 5) = PRECAR_FI_POS(i) 'Worksheets("Result").Cells(posStep, 6) = POSTCAR_FI_POS(i) 'window 10
56. 56. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 52 Worksheets("Result").Cells(posStep, 7) = PRECAR_FI_POS(i) Worksheets("Result").Cells(posStep, 8) = POSTCAR_FI_POS(i) Next i Dim negStep As Integer negStep = 2 'NEGATIVE EARNING For i = 1 To negNoFiEvent ' go through event For j = 1 To window PRECAR_FI_NEG(i) = PRECAR_FI_NEG(i) + arrAbnormalReturn(indexNegF(i) - j + 1) POSTCAR_FI_NEG(i) = POSTCAR_FI_NEG(i) + arrAbnormalReturn(indexNegF(i) + j) Next j 'write CAR to Data sheet Worksheets("Data").Cells(indexNegF(i), 11) = PRECAR_FI_NEG(i) Worksheets("Data").Cells(indexNegF(i), 12) = POSTCAR_FI_NEG(i) 'write CAR to result sheet negStep = negStep + 1 Worksheets("Result").Cells(negStep, 12) = arrSymbol(indexNegF(i)) Worksheets("Result").Cells(negStep, 13) = arrDate(indexNegF(i)) 'to change when window change 'window 20 'Worksheets("Result").Cells(negStep, 14) = PRECAR_FI_NEG(i) 'Worksheets("Result").Cells(negStep, 15) = POSTCAR_FI_NEG(i) 'window 30 'Worksheets("Result").Cells(negStep, 16) = PRECAR_FI_NEG(i) 'Worksheets("Result").Cells(negStep, 17) = POSTCAR_FI_NEG(i) 'window 10 Worksheets("Result").Cells(negStep, 18) = PRECAR_FI_NEG(i) Worksheets("Result").Cells(negStep, 19) = POSTCAR_FI_NEG(i) Next i
57. 57. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 53 Dim rightStep As Integer rightStep = 2 'write Data to Result For i = 1 To noRightEvent ' go through event For j = 1 To window PRECAR_RIGHTS(i) = PRECAR_RIGHTS(i) + arrAbnormalReturn(indexRightEvent(i) - j + 1) POSTCAR_RIGHTS(i) = POSTCAR_RIGHTS(i) + arrAbnormalReturn(indexRightEvent(i) + j) Next j Worksheets("Data").Cells(indexRightEvent(i), 11) = PRECAR_RIGHTS(i) Worksheets("Data").Cells(indexRightEvent(i), 12) = POSTCAR_RIGHTS(i) rightStep = rightStep + 1 Worksheets("Result").Cells(rightStep, 23) = arrSymbol(indexRightEvent(i)) Worksheets("Result").Cells(rightStep, 24) = arrDate(indexRightEvent(i)) Worksheets("Result").Cells(rightStep, 25) = arrRights(indexRightEvent(i)) 'window 20 'Worksheets("Result").Cells(rightStep, 26) = PRECAR_RIGHTS(i) 'Worksheets("Result").Cells(rightStep, 27) = POSTCAR_RIGHTS(i) 'window 30 'Worksheets("Result").Cells(rightStep, 28) = PRECAR_RIGHTS(i) 'Worksheets("Result").Cells(rightStep, 29) = POSTCAR_RIGHTS(i) 'window 10 Worksheets("Result").Cells(rightStep, 30) = PRECAR_RIGHTS(i) Worksheets("Result").Cells(rightStep, 31) = POSTCAR_RIGHTS(i) Next i MsgBox ("finish processing data") End Sub
58. 58. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 54 '~~~~~~~~~~~~~~~~~~~~~~ handle continuous CAR ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Sub Calculate_PRECAR_POSTCAR() 'This sub calculate mean of PRECAR and POSTCAR seperately for each event type 'parameter: event window Dim window As Integer window = 30 Dim posPreMean() As Double Dim posPostMean() As Double Dim negPreMean() As Double Dim negPostMean() As Double Dim rightPreMean() As Double Dim rightPostMean() As Double ReDim posPreMean(window) As Double ReDim posPostMean(window) As Double ReDim negPreMean(window) As Double ReDim negPostMean(window) As Double ReDim rightPreMean(window) As Double ReDim rightPostMean(window) As Double Dim totalRows As Integer Dim arrSymbol() As String Dim arrDate() As String Dim arrAbnormalReturn() As Double Dim arrFinancialStatement() As Double Dim arrRights() As Double Dim posNoFiEvent As Integer Dim negNoFiEvent As Integer Dim noRightEvent As Integer noRightEvent = 0 posNoFiEvent = 0 negNoFiEvent = 0
59. 59. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 55 Dim indexPosF() As Integer ' read when (position) the event happen Dim indexNegF() As Integer Dim indexRightEvent() As Integer ' Read basic Data Sheets("Data").Select Cells(4, 1).Select totalRows = Range(Selection, Selection.End(xlDown)).count 'MsgBox (totalRows) ReDim arrSymbol(totalRows) As String ReDim arrDate(totalRows) As String ReDim arrAbnormalReturn(totalRows) As Double ReDim arrFinancialStatement(totalRows) As Double ReDim arrRights(totalRows) As Double 'read Data into these array Dim i As Integer For i = 4 To totalRows arrSymbol(i) = Worksheets("Data").Cells(i, 1) arrDate(i) = Worksheets("Data").Cells(i, 2) arrAbnormalReturn(i) = Worksheets("Data").Cells(i, 10) arrRights(i) = Worksheets("Data").Cells(i, 17) arrFinancialStatement(i) = Worksheets("Data").Cells(i, 18) 'count good/bad BCTC If (arrFinancialStatement(i) = 1) Then posNoFiEvent = posNoFiEvent + 1 ElseIf (arrFinancialStatement(i) = -1) Then negNoFiEvent = negNoFiEvent + 1 End If 'count Rights If (arrRights(i) 0) Then noRightEvent = noRightEvent + 1
60. 60. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 56 End If Next i 'MsgBox (noRightEvent) ReDim indexPosF(posNoFiEvent) As Integer ReDim indexNegF(negNoFiEvent) As Integer ReDim indexRightEvent(noRightEvent) As Integer Dim j, k, m As Integer j = 0 k = 0 m = 0 'get the position of event For i = 4 To totalRows If (arrFinancialStatement(i) = 1) Then j = j + 1 indexPosF(j) = i 'position of event ElseIf (arrFinancialStatement(i) = -1) Then k = k + 1 indexNegF(k) = i End If If (arrRights(i) 0) Then m = m + 1 indexRightEvent(m) = i End If Next i 'Calculate CAR based on estimate window - including the announment day Dim PRECAR_FI_POS() As Double Dim PRECAR_FI_NEG() As Double Dim PRECAR_RIGHTS() As Double
61. 61. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 57 ReDim PRECAR_FI_POS(posNoFiEvent) As Double ReDim PRECAR_FI_NEG(negNoFiEvent) As Double ReDim PRECAR_RIGHTS(noRightEvent) As Double Dim POSTCAR_FI_POS() As Double Dim POSTCAR_FI_NEG() As Double Dim POSTCAR_RIGHTS() As Double ReDim POSTCAR_FI_POS(posNoFiEvent) As Double ReDim POSTCAR_FI_NEG(negNoFiEvent) As Double ReDim POSTCAR_RIGHTS(noRightEvent) As Double Dim count As Integer count = 1 Dim totalPositive As Double Dim totalNegative As Double Dim totalRight As Double totalPositive = 0 totalNegative = 0 totalRight = 0 Dim PostPosMean As Double Dim PostNegMean As Double Dim PostRightMean As Double Worksheets("Result2").Cells(count, 1) = "WINDOW" Worksheets("Result2").Cells(count, 2) = "PF MEAN" Worksheets("Result2").Cells(count, 3) = "NF MEAN" Worksheets("Result2").Cells(count, 4) = "RIGHT MEAN" '~~~~~~~~~~~~~~~~PRE CAR~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ For j = window To 0 Step -1 'POSITIVE
62. 62. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 58 For i = 1 To posNoFiEvent ' go through number of event 'PRECAR_FI_POS(i) = PRECAR_FI_POS(i) + arrAbnormalReturn(indexPosF(i) - j + 1) posPreMean(j) = posPreMean(j) + arrAbnormalReturn(indexPosF(i) - j) Next i ' Calculate Mean totalPositive = totalPositive + posPreMean(j) ' totalPositive = totalPositive / posNoFiEvent 'NEGATIVE For i = 1 To negNoFiEvent ' go through number of event negPreMean(j) = negPreMean(j) + arrAbnormalReturn(indexNegF(i) - j) Next i ' Calculate Mean totalNegative = totalNegative + negPreMean(j) ' totalNegative = totalNegative / negNoFiEvent 'RIGHTS For i = 1 To noRightEvent ' go through number of event rightPreMean(j) = rightPreMean(j) + arrAbnormalReturn(indexRightEvent(i) - j) Next i ' Calculate Mean totalRight = totalRight + rightPreMean(j) ' totalRight = totalRight / noRightEvent 'write MEAN to result2 sheet count = count + 1 Worksheets("Result2").Cells(count, 1) = -j Worksheets("Result2").Cells(count, 2) = totalPositive / posNoFiEvent Worksheets("Result2").Cells(count, 3) = totalNegative / negNoFiEvent Worksheets("Result2").Cells(count, 4) = totalRight / noRightEvent Next j
63. 63. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 59 'get CAR from PRE 'PostPosMean = totalPositive 'PostNegMean = 0 'PostRightMean = 0 '~~~~~~~~~~~~~~~~POST CAR~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ For j = 1 To window 'POSITIVE For i = 1 To posNoFiEvent ' go through number of event posPreMean(j) = posPreMean(j) + arrAbnormalReturn(indexPosF(i) + j) Next i ' Calculate Mean totalPositive = totalPositive + posPreMean(j) 'NEGATIVE For i = 1 To negNoFiEvent ' go through number of event negPreMean(j) = negPreMean(j) + arrAbnormalReturn(indexNegF(i) + j) Next i ' Calculate Mean totalNegative = totalNegative + negPreMean(j) 'RIGHTS For i = 1 To noRightEvent ' go through number of event rightPreMean(j) = rightPreMean(j) + arrAbnormalReturn(indexRightEvent(i) + j) Next i ' Calculate Mean totalRight = totalRight + rightPreMean(j) 'write MEAN to result2 sheet count = count + 1 Worksheets("Result2").Cells(count, 1) = j Worksheets("Result2").Cells(count, 2) = totalPositive / posNoFiEvent Worksheets("Result2").Cells(count, 3) = totalNegative / negNoFiEvent
64. 64. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 60 Worksheets("Result2").Cells(count, 4) = totalRight / noRightEvent Next j MsgBox ("finish processing data") End Sub Sub Calculate_Mean_CAR() 'This sub calculate mean CAR from -30 to 30 days for all three event type Dim window As Integer window = 30 Dim posPreMean() As Double Dim posPostMean() As Double Dim negPreMean() As Double Dim negPostMean() As Double Dim rightPreMean() As Double Dim rightPostMean() As Double ReDim posPreMean(window) As Double ReDim posPostMean(window) As Double ReDim negPreMean(window) As Double ReDim negPostMean(window) As Double ReDim rightPreMean(window) As Double ReDim rightPostMean(window) As Double Dim totalRows As Integer Dim arrSymbol() As String Dim arrDate() As String Dim arrAbnormalReturn() As Double Dim arrFinancialStatement() As Double Dim arrRights() As Double
65. 65. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 61 Dim posNoFiEvent As Integer Dim negNoFiEvent As Integer Dim noRightEvent As Integer noRightEvent = 0 posNoFiEvent = 0 negNoFiEvent = 0 Dim indexPosF() As Integer ' read when (position) the event happen Dim indexNegF() As Integer Dim indexRightEvent() As Integer ' Read basic Data Sheets("Data").Select Cells(4, 1).Select totalRows = Range(Selection, Selection.End(xlDown)).count 'MsgBox (totalRows) ReDim arrSymbol(totalRows) As String ReDim arrDate(totalRows) As String ReDim arrAbnormalReturn(totalRows) As Double ReDim arrFinancialStatement(totalRows) As Double ReDim arrRights(totalRows) As Double 'read Data into these array Dim i As Integer For i = 4 To totalRows arrSymbol(i) = Worksheets("Data").Cells(i, 1) arrDate(i) = Worksheets("Data").Cells(i, 2) arrAbnormalReturn(i) = Worksheets("Data").Cells(i, 10) arrRights(i) = Worksheets("Data").Cells(i, 17) arrFinancialStatement(i) = Worksheets("Data").Cells(i, 18) 'count good/bad BCTC If (arrFinancialStatement(i) = 1) Then posNoFiEvent = posNoFiEvent + 1
66. 66. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 62 ElseIf (arrFinancialStatement(i) = -1) Then negNoFiEvent = negNoFiEvent + 1 End If 'count Rights If (arrRights(i) 0) Then noRightEvent = noRightEvent + 1 End If Next i 'MsgBox (noRightEvent) ReDim indexPosF(posNoFiEvent) As Integer ReDim indexNegF(negNoFiEvent) As Integer ReDim indexRightEvent(noRightEvent) As Integer Dim j, k, m As Integer j = 0 k = 0 m = 0 'get the position of event For i = 4 To totalRows If (arrFinancialStatement(i) = 1) Then j = j + 1 indexPosF(j) = i 'position of event ElseIf (arrFinancialStatement(i) = -1) Then k = k + 1 indexNegF(k) = i End If If (arrRights(i) 0) Then m = m + 1 indexRightEvent(m) = i End If
67. 67. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 63 Next i 'Calculate CAR based on estimate window - including the announment day Dim PRECAR_FI_POS() As Double Dim PRECAR_FI_NEG() As Double Dim PRECAR_RIGHTS() As Double ReDim PRECAR_FI_POS(posNoFiEvent) As Double ReDim PRECAR_FI_NEG(negNoFiEvent) As Double ReDim PRECAR_RIGHTS(noRightEvent) As Double Dim POSTCAR_FI_POS() As Double Dim POSTCAR_FI_NEG() As Double Dim POSTCAR_RIGHTS() As Double ReDim POSTCAR_FI_POS(posNoFiEvent) As Double ReDim POSTCAR_FI_NEG(negNoFiEvent) As Double ReDim POSTCAR_RIGHTS(noRightEvent) As Double Dim count As Integer count = 1 Dim totalPositivePre As Double Dim totalNegativePre As Double Dim totalRightPre As Double totalPositivePre = 0 totalNegativePre = 0 totalRightPre = 0 Dim totalPositivePost As Double Dim totalNegativePost As Double Dim totalRightPost As Double totalPositivePost = 0 totalNegativePost = 0 totalRightPost = 0 Worksheets("Result3").Cells(count, 1) = "WINDOW" Worksheets("Result3").Cells(count, 2) = "PF MEAN"
68. 68. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 64 Worksheets("Result3").Cells(count, 3) = "NF MEAN" Worksheets("Result3").Cells(count, 4) = "RIGHT MEAN" '~~~~~~~~~~~~~~~~PRE CAR~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ For j = window To 0 Step -1 'POSITIVE For i = 1 To posNoFiEvent ' go through number of event 'PRECAR_FI_POS(i) = PRECAR_FI_POS(i) + arrAbnormalReturn(indexPosF(i) - j + 1) posPreMean(j) = posPreMean(j) + arrAbnormalReturn(indexPosF(i) - j) Next i ' Calculate Mean totalPositivePre = totalPositivePre + posPreMean(j) ' totalPositivePre = totalPositivePre / posNoFiEvent 'NEGATIVE For i = 1 To negNoFiEvent ' go through number of event negPreMean(j) = negPreMean(j) + arrAbnormalReturn(indexNegF(i) - j) Next i ' Calculate Mean totalNegativePre = totalNegativePre + negPreMean(j) ' totalNegativePre = totalNegativePre / negNoFiEvent 'RIGHTS For i = 1 To noRightEvent ' go through number of event rightPreMean(j) = rightPreMean(j) + arrAbnormalReturn(indexRightEvent(i) - j) Next i ' Calculate Mean totalRightPre = totalRightPre + rightPreMean(j) ' totalRightPre = totalRightPre / noRightEvent 'write MEAN to Result3 sheet count = count + 1
69. 69. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 65 Worksheets("Result3").Cells(count, 1) = -j Worksheets("Result3").Cells(count, 2) = totalPositivePre / posNoFiEvent Worksheets("Result3").Cells(count, 3) = totalNegativePre / negNoFiEvent Worksheets("Result3").Cells(count, 4) = totalRightPre / noRightEvent Next j 'get CAR from PRE 'PostPosMean = totalPositivePre 'PostNegMean = 0 'PostRightMean = 0 '~~~~~~~~~~~~~~~~POST CAR~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ For j = 1 To window 'POSITIVE For i = 1 To posNoFiEvent ' go through number of event posPreMean(j) = posPreMean(j) + arrAbnormalReturn(indexPosF(i) + j) Next i ' Calculate Mean totalPositivePost = totalPositivePost + posPreMean(j) 'NEGATIVE For i = 1 To negNoFiEvent ' go through number of event negPreMean(j) = negPreMean(j) + arrAbnormalReturn(indexNegF(i) + j) Next i ' Calculate Mean totalNegativePost = totalNegativePost + negPreMean(j) 'RIGHTS For i = 1 To noRightEvent ' go through number of event rightPreMean(j) = rightPreMean(j) + arrAbnormalReturn(indexRightEvent(i) + j) Next i ' Calculate Mean totalRightPost = totalRightPost + rightPreMean(j)
70. 70. APPENDIX II Vietnam Stock Market: How Stock Returns Response to Event Announcements 66 'write MEAN to Result3 sheet count = count + 1 Worksheets("Result3").Cells(count, 1) = j Worksheets("Result3").Cells(count, 2) = totalPositivePost / posNoFiEvent Worksheets("Result3").Cells(count, 3) = totalNegativePost / negNoFiEvent Worksheets("Result3").Cells(count, 4) = totalRightPost / noRightEvent Next j MsgBox ("finish processing data") End Sub
71. 71. APPENDIX III Vietnam Stock Market: How Stock Returns Response to Event Announcements 67 APPENDIX III REFERENCES 1. John Y. Campbell/Andrew W. Lo/A. Craig MacKinlay, 1997, The econometrics of Financial Markets, Princeton University Press, Princeton, New Jersey 2. Cheng-Few Lee, Alice C.Lee, 2006, Encyclopedia of Finance, Springer Science - Business Media, Inc http://books.google.com.vn/books?id=I6BH- RKYVG4C&printsec=frontcover&dq=Encyclopedia+of+Finance&hl=vi&ei=qyw sTMzYNYP- 8AaVoIGfDg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCcQ6AEw AA#v=onepage&q&f=false 3. Beta were collected from Bloomberg on 30th March, 2010 www.bloomberg.com/ 4. Stock prices and VN-index were collected from Hochiminh Stock Exchange www.hsx.vn 5. B. Espen Eckbo, 2007, Handbook of Corporate Finance, North-Holland http://books.google.com.vn/books?id=p7HcvlIAgdkC&printsec=frontcover#v=on epage&q&f=false 6. Donald Getz, Event Studies. Theory, Research and policy for plannes events, 2007, Butterworth-Heinemann
72. 72. APPENDIX III Vietnam Stock Market: How Stock Returns Response to Event Announcements 68 http://books.google.com.vn/books?id=g6uwI- 19chMC&printsec=frontcover&dq=event+studies&hl=vi&ei=7xcoTKbrH4OB8g aSoKzfDw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCwQ6AEwA A#v=onepage&q&f=false 7. George M. Frankfuter and Bob G. Wood with James Wansley, 2003, Dividend Policy Theory and Practice, Elsevier Science http://books.google.com.vn/books?id=9G6H70WdBFoC&pg=PA97&dq=dividen d+hypothesis&hl=vi&ei=vGMoTN6qJMmRnweQwYSpAQ&sa=X&oi=book_res ult&ct=result&resnum=1&ved=0CCcQ6AEwAA#v=snippet&q=%22dividend%2 0hypothesis%22&f=false 8. A. Mitchell Polinsky, Steven Shavell, Handbook of law and economics http://books.google.com.vn/books?id=ibCgJjch1lAC&pg=PA947&dq=%22event +studies%22&hl=vi&ei=uQQqTJz1K9S_rAfmueV0&sa=X&oi=book_result&ct= result&resnum=4&ved=0CDcQ6AEwAw#v=onepage&q&f=false