Testing Granger causal relationship between trading behavior of securities companies, foreign investors and returns of VN-Index

Abstract

This paper aims to investigate the causal relationship in investor’s trading behavior including securities companies and foreign investors in Vietnamese securities market. Using the daily data of foreign investor’s net trading volume (KLGDR NN), securities companies’ net trading volume (KLGDR TD) and VN-Index returns in the period from Jan, 2015 to Sep,2020. This study also uses Granger test and VAR model to evaluate causality as well as determine the impact of trading behavior on stock indexes. Results of this paper show that a two-way causal relationship are existed between the VNIndex and net trading volume of foreign investors and securities companies. Specifically, the stock index affects the trading behavior of investors for 3 days before trading, while the trading behavior only affects one day later. These relationships are positive effects and statistically significant at 5% with correlation coefficient is small.