How does the Vietnamese stock market react when the Fed gives an announcement in time at the zero lower bound?

Abstract

This study analyzes the impact of US’s UMP announcements on the Vietnamese stock market during the 2008 GFC and COVID-19 pandemic. Utilizing an event study methodology, it examines both market-wide and sectors-specific stock reactions. The findings reveal overall positive market responses to UMP news in both periods, but with notable differences across industries and crises. During the COVID-19 pandemic, real estate, industrials, materials, and finance sectors exhibited significantly stronger positive reactions compared to the GFC. These sectors maintained positive AARs and CAARs with high statistical significance, suggesting heightened sensitivity to UMP during the pandemic-induced economic downturn. Furthermore, the financial and real estate sectors significantly outperformed their GFC responses during COVID-19, indicating a potential shift in investor sentiment and risk appetite towards these sectors amidst the pandemic's unique economic landscape. This research provides valuable insights into the diverse impacts of UMP across different sectors and crisis contexts.

Keywords

• Unconventional monetary policy
• Stock market
• Global financial crisis
• COVID-19
• Forward guidance