Assessing the impact of information shock on market returns through the arch/garch model family

Abstract

The fluctuations of stock price indexes and derivative stock price indexes are always of special interest to investors, because they play an important role in stock valuation and risk management. There are many methods for forecasting financial asset price fluctuations. Using expert contributors' insights, this study estimates the return volatility of the VN-Index by applying a family of time series regression models with heteroskedasticity conditions, with research data collected in the period from December 2012 to November 2023. Research results show that: (1) The returns of the VN-Index are characterized by cluster fluctuations and are not normally distributed; (2) The time variance of returns is time-varying and predictable; (3) Past variances and returns have an impact on current variances and returns; (4) There is evidence that a leverage effect exists for the VN-Index, meaning that the impact of negative shocks on index returns is much more significant than positive shocks. These findings provide a number of important documents for investors, businesses, and funds participating in the Vietnamese stock market in decisions related to asset allocation, investment decision-making, risk management, etc.