An Analysis of Investment Strategies and Abnormal Returns in the Vietnam Stock Market. Ming-Chin, et al (2015)

 The authors are looking at the Vietnam stock exchanges and researching the factor related returns of the stocks therein; specifically, they are looking at the value, momentum, size, and liquidity factors that have been used in other studies in different markets.

In regard to the value factor, they find that portfolios of the top earnings yield companies (i.e., value companies) have returns that exceed those of the stocks with the lowest earnings yields (i.e., growth companies).  Most of this excess return comes from shorting growth companies, and works best in holding periods exceeding 9 months.

In regard to the momentum factor, they only find a statistically significant different between past winner and past winners for holding periods of 1-month and 36-months.  The authors conclude that momentum is effective; however, we might caution that stance due to the insignificance of the t-statistics.  In looking at a chart of the excess returns, though, we see similarities to prior studies in different markets where the momentum returns revert to the mean and are ineffective after 12 month holding periods.

In regard to the liquidity factor, they find that buying liquid stocks and selling illiquid stocks is an extremely effective strategy; buying the top stocks according to liquidity seems to significantly outperform the equal weighted index over all holding periods.  This might be due to the Vietnamese exchanges being new, so liquidity is very valuable until the market matures.

In regard to the size factor, they find no significant difference between the returns of small companies and big companies.  In fact, they find that the smallest companies underperform the index and the big companies, which is backwards from the normal strategy related to size (i.e., that small companies outperform large companies).  This may also be related to the newness of the Vietnam exchanges, wherein, larger companies are much more valuable.

Ming-Chin Chin, & Nguyen Vu Hieu. (2015). An Analysis of Investment Strategies and Abnormal Returns in the Vietnam Stock Market. Journal of Applied Economics & Business Research, 5(4), 194–208.

The purpose of this paper is to understand the linkages between excess returns and four investment strategies - value, momentum, size, and liquidity - for the Vietnam stock market during the period 2006-2014. The empirical results suggest that a value strategy, such as the E/P and B/P ratios, and momentum and liquidity strategies are the most successful and generate significant excess returns, in contrast to the size strategy, which does not workin the Vietnam stock mark. Therefore, investors who want to make a profit when investing in the Vietnam stock market should track published financial information and find winner stocks by referring to value, momentum, and liquidity strategies.