tailieunhanh - Developing a new stock index for Vietnam’s securities market

The research suggests a new set of stock market indexes to deal with shortcomings of existing indexes, thereby providing relevant entities with a new view on development of securities market in Vietnam. | 60 | Nguyễn Hữu Huân | 60 - 78 Developing a New Stock Index for Vietnam’s Securities Market NGUYỄN HỮU HUÂN University of Economics, HCMC - huannguyen@ ARTICLE INFO ABSTRACT Article history: Received: June 25, 2013 Received in revised form Sep 10, 2013 Accepted: March 31, 2014 Keywords: Stock market, stock index, stock exchange. Stock market index plays an important role as a measure of development of securities markets of a country or a region. Results of this empirical research show that in its 13 years of development, Vietnamese securities market indexes only had limited values because of their poor market representation and predictive power, implying the need to merge Hà Nội and HCMC stock exchanges. The research suggests a new set of stock market indexes to deal with shortcomings of existing indexes, thereby providing relevant entities with a new view on development of securities market in Vietnam. JED April 2014| 61 1. INTRODUCTION Stock market plays an important role in raising investment and is an attractive investment channel to both institutional and individual investors. General market indexes can provide an overview of stock market, its development and its effects on the economic growth. As an infant stock market, Vietnam’s stock exchanges, at present, still lack stock indices that can fulfill their functions and serve as a solid basis for investors in their decision making process. In the market, VN-Index and HNX-Index have exposed many shortcomings such as low market representativity, poor predictive power and being affected easily by stock codes with high market capitalization. Thus, this paper aims to evaluate present indices of stock market and suggest some measures to build new stock indices in order to provide investors with more viable look at stock market in particular and securities market in general in Vietnam. 2. APPROPRIATE INDEX a. Theoretical Bases: A security market index represents a particular security .