The Impact of the Introduction of Index Futures on the Daily Returns Anomaly in the Ho Chi Minh Stock Exchange

TLDR: In this paper, the authors investigated the impact of the introduction of the VN30-Index futures contract on the daily returns anomaly for the Ho Chi Minh Stock Exchange (HOSE).

Abstract: This study investigated the impact of the introduction of the VN30-Index futures contract on the daily returns anomaly for the Ho Chi Minh Stock Exchange (HOSE). Daily returns of the VN30-Index for the period 6 February 2012 through 31 December 2019 are used in this study to ascertain the new VN30-Index futures contract influence on the day-of-the-week anomaly observed in the HOSE. To test this effect, ordinary least square (OLS), generalized autoregressive conditional heteroskedasticity [GARCH (1,1)] and exponential generalized autoregressive conditional heteroskedasticity [EGARCH (1,1)] regression models were employed. The empirical results obtained from the models support the presence of the day-of-the-week effect for the HOSE during the study period. Specifically, a negative effect was observed for Monday. However, the analysis revealed that the day-of-the-week effect was only present in stock returns for the pre-index futures period, not for the post-index futures period. These findings suggest that the introduction of the VN30-Index futures contract had a significant impact on the daily returns anomaly in Vietnam’s HOSE, providing evidence that the introduction of the index futures contract facilitated market efficiency.