The relationship between stock market performance and economic growth : the case of Vietnam

Abstract

This study is conducted with an aim to clarify the relationship between stock market performance and national economy in the case of Vietnam. Data about VN-index and real GDP from Q1/2004 to Q4/2010 is collected and Granger causality is employed to determine this relationship. The findings suggest that there is no causal relationship between real GDP growth rate and stock index yield with the optimal lag length of one quarter. Possible explanation for the absence of causal relationship between these two variables in Vietnam is provided with the main reason coming from the fact that Vietnamese stock market is highly volatile and contains serious asymmetric information problems, most of Vietnamese investors are for trading purpose in short term and they may not base on financial statements of listed companies to make decisions.