A critical analysis of using stock market Past returns as a forecasting determinant of stock market liquidity in Vietnam

Abstract

This paper examines the causal relationship between stock market past returns and stock market liquidity in Vietnam. This research employs time series analysis and ARCH models to analyze daily, weekly and monthly data obtained from Vietnamese stock market. Expectedly, the findings of this research confirm a strong and positive relationship between market past returns and market liquidity for daily, weekly and monthly intervals. As well, the research identifies three forecasting models which can be used to predict stock market liquidity on daily, weekly and monthly basis from market past returns. This research finds out the feasibility of those models in predicting the change in market liquidity from market past return in Vietnamese stock market with a high level of precision.

Keywords

• vietnam
• stock market
• stock return
• stock liquidity