VAR Analysis on Dynamic Relationship Between Exchange Rate of VND/USD and Vietnamese Stock Market Index Returns

Abstract: This study is an attempt to explore the dynamic relationship between exchange rate of VND/USD and Vietnamese stock market index. Daily data from 21st Feb 2018 to 21st Feb 2019 is taken, constituting 251 observations. To capture dynamic and stable relationship among these variables, the author uses Vector Autoregressive Model. The results show that, in short run, the results show that each variable is highly affected by changes of value and past value of its and the other variables at different degree. In addition, there exists a long run relationship among Vietnamese stock market index and exchange rate. 

Key words: unit root tests; vector auto-regression (VAR), exchange rate; Vietnamese stock market

        JEL codes: C32, G1