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. 2024 Feb 29;19(2):e0294456.
doi: 10.1371/journal.pone.0294456. eCollection 2024.

The effects of free trade agreements on the stock market: Evidence from Vietnam

Huy Pham  1 , Priyantha Mudalige  2 , Hanh Le  1 , Mai Bui  1 , Van Nguyen  3 , Vikash Ramiah  4 , Tuan Chu  1 , Tuan Hung Vu  5
Affiliations

The effects of free trade agreements on the stock market: Evidence from Vietnam

Huy Pham et al. PLoS One. .

Abstract

This study examines the effects of news events related to the European Union-Vietnam Free Trade Agreement (EVFTA) on the Vietnam stock market from 2010 to 2020. We calculate sectoral abnormal returns prior to, during, and after announcements and find that the Vietnamese stock market is susceptible to these events. We discovered that the announcement had a negative impact on the market, which might diminish the effectiveness of the Agreement. The findings show that more than half of Vietnam's sectors had an immediate reaction to EVFTA announcements, with fourteen reacting negatively and six responding positively. Two of the ten events did not have any immediate impact on these industries but all events resulted in either early or delayed reactions. We also find market scepticism and major changes in the deal led to the emergence of a diamond risk structure. We run multiple robustness tests to account for market integration and other factors that may affect stock returns. In addition, we explore potential sectoral systematic risk changes following these occurrences using different ARCH-type models. These additional tests confirm the robustness of our findings.

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Conflict of interest statement

The authors have declared that no competing interests exist.

Figures

Fig 1
Fig 1. Mechanism diagram for the impact of EVFTA-related events on the Vietnam stock market.
Fig 2
Fig 2. Short-term changes in systematic risk following EVFTA announcements.
Fig 3
Fig 3. Long-term changes in systematic risk following EVFTA announcements.
See this image and copyright information in PMC

References

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