THE IMPACT OF FOREIGN INVESTORS' ABNORMAL TRADING ON THE ABNORMAL RETURNS OF BANKING SECTOR STOCKS: THE CASE OF VIETNAM

Abstract

This study aims to analyze the impact of foreign investors' abnormal trading on the abnormal returns of banking sector stocks in Vietnam from 2006 to 2023. The data sample includes 631 abnormal buy events, 571 abnormal buy events on net purchase days, 477 abnormal sell events, and 432 abnormal sell events on net sell days of foreign investors. The study employs the event study methodology with parametric and nonparametric tests. The results show that abnormal buy events and abnormal buy events on net purchase days by foreign investors convey positive information and have a positive impact on stock prices, creating positive abnormal returns, with stock prices forming new equilibrium levels. Abnormal sell events and abnormal sell events on net sell days convey negative information and have a negative impact on stock prices in the short term, after which prices tend to return to their initial states as before the events. The study suggests that investors can observe foreign investors' trading behavior as reference information in their investment decisions regarding banking sector stocks. Furthermore, it recommends that the government consider relaxing the "room" limit on foreign ownership in Vietnamese commercial banks to align with the objective of upgrading the stock market.