Bachelor of Financial & Banking Thesis

THE IMPACTS OF FOREIGN SECTOR (FII) ON LIQUIDITY

Dao Ngoc Quynh Nguyen

SB60485

OF VIETNAM
STOCK
Nguyen Thi
Thu HoaiMARKET
SB60476
Group members

Pham Thi Ngoc Thuy

SB60456

Phan Phuong Tuong

SB60561

Truong Cong Sang

SB90199

Supervisor

Mr. Tran Minh Phang

Hochiminh City
May 2015

ACKNOWLEDGEMENT

ABSTRACT

TABLE OF CONTENT
ACKNOWLEDGEMENT....................................................................................2
ABSTRACT.........................................................................................................3
TABLE OF CONTENT........................................................................................4
LIST OF ABBREVIATIONS...............................................................................7
LIST OF FIGURES..............................................................................................8
LIST OF TABLES................................................................................................9
CHAPTER 1: INTRODUCTION.......................................................................10
1.1 Topic background..............................................................................................10
1.2 Problem statement.............................................................................................13
1.3 Research objectives...........................................................................................13
1.4 Research questions............................................................................................13
1.5 Research scope..................................................................................................14
1.6 Methodology and data overview........................................................................14
1.7 Conclusion.........................................................................................................14
1.8 Thesis outline.....................................................................................................15

CHAPTER 2: LITERATURE REVIEW............................................................16

2.1 Review stock market of Vietnam.......................................................................16
2.1.1 Stock Exchange introduction..................................................................................16
2.1.2 History and developments of Viet Nam Stock Market...........................................18

2.2 Related concept.................................................................................................23

2.3 Literature of liquidity.........................................................................................23
2.4 Liquidity measure..............................................................................................25
4

2.4.1 One-dimensional measurement...............................................................................25

2.4.2 Multi-dimensional measurement.............................................................................27

2.5 Literature of Unit root test.................................................................................28

2.6 Literature of VAR..............................................................................................29
2.7 Literature of Granger Causality.........................................................................29
2.8 Liquidity empirical research..............................................................................30
2.9 Conceptual Framework......................................................................................35

CHAPTER 3: RESEARCH METHODOLOGY................................................36

3.1 Methodology Overview.....................................................................................36
3.1.1 Research Philosophy...............................................................................................36
3.1.2 Nature of Research..................................................................................................37
3.1.3 Research Approach..................................................................................................37
3.1.4 Research Method.....................................................................................................38
3.1.5 Research Strategy....................................................................................................39
3.1.6 Time horizon...........................................................................................................39

3.2 Data Collection Method.....................................................................................40

3.3 Process of analyze.............................................................................................40
3.4 Data Analysis Methods......................................................................................41
3.4.1 Unit Root Test.........................................................................................................41
3.4.2 VAR Model..............................................................................................................42
3.4.3 Choosing Lag Length..............................................................................................43
3.4.4 Granger Causality....................................................................................................43
3.4.5 Amihud Illiqudiity...................................................................................................45

3.5 Detections for regression model........................................................................46

3.5.1 Autocorrelation........................................................................................................46

3.5.2 Multicollinearity......................................................................................................47
3.5.3 Heteroscedasticity...................................................................................................48

3.6 Ethical Consideration and Limitation................................................................48

REFERENCE.....................................................................................................50

LIST OF ABBREVIATIONS
APEC

Asia-Pacific Economic Cooperation

FDI

Foreign Direct Investors

FII

Foreign sector/Foreign Indirect Investors

HNX

Hanoi Stock Exchange

HOSE

Hochiminh Stock Exchange

VND

Vietnam Dong

WB

World Bank

WTO

World Trade Organization

LIST OF FIGURES
Figure 1

Foreign Indirect Investment inflows into Vietnam Stock Market

Figure 2

FII activities in Vietnam Stock Market from 2007 to 2014

14

Figure 3

Vietnamese stock market VN Index from 2007 to 2009

16

Figure 4

The data of daily VN-Index from 2010 to 2014

18

Figure 5

Theoretical framework

35

Figure 6

Research approach

37

Figure 7

Process of data analysis

41

LIST OF TABLES

CHAPTER 1: INTRODUCTION
1.1 Topic background
Vietnam is an attractive market for foreign investors because of the favorable conditions in
terms of economic and policy mechanisms. When considering the role elements affecting to
the development of the nations, foreign capital investment is necessary for developing
country as Vietnam. This capital consists of foreign direct investment (FDI) and foreign
institutional investment (FII). While FDI has a role to improve manufacture, FII has the role
of encouraging financial market to expand the scale, improves efficiency of operational and
increasing evidences.

The structure of FII into Vietnam last time primarily focused on stock trading segment. The
stock capital was maintaining positive at the high levels, a key component of this scale is the
funds of foreign investors investing in secondary market transactions.

The milestone of foreign indirect investment to Vietnam includes two mains stages. The first
stage is the period from 1991 to 2002. Although Vietnam had not have stock market, but FII
appeared from the early 90s with 7 funds and total capital is around 400 million USD
(Source: IMF). In this period, the Asian financial crisis (1996 1997) occurred and led the
prices of listed funds fell sharply compared to net asset value. This crisis also affected on
foreign portfolio investment until 2002. For example, there were not any new investment into
Vietnamese market and the funds narrowed 90% size of capital from 2000 to 2002. Specially,
in July 2000, Vietnam had opened the secondary stock market.

The second stage begin from 2003 to present: FIIs in Vietnam rebounded and grown
overtime; hit a point from 2006 to 2007. According to ANZ report; from 2001 to 2006 FII
10

was approximately 12 billion and in 2007 reached 5.7 billion USD (Source: IMF). Because in
that time Vietnam became the official 150th member of WTO and the host of 14th APEC;
Vietnam had a chance to become the attractive destination for foreign investors over the
world. However in 2008, due to bad effect of the global economic downturn, the value of
shares on the stock market plunged; the amount of FII into Vietnam market fell sharply, while
the many foreign investors withdraw capital from the stock market Vietnam.

In 2009, FII continued falling down around 71 million USD (1,500 billion VND). By 2010,
with the restoration of the world economy, the amount of FII into Vietnam's stock market
surged. In 2012, foreign investors bought stock with an amount of 4,600 billion VND in both
Hanoi and Hochiminh Stock Exchange. In Hochiminh stock market, the net purchase value
increased nearly 3 times compared to 2011 contributed to the increase in the share capital in
2012 to nearly 1,900 million VND.

By the end of 2013, the volume of FII did not change significantly total capital of stock
maintain around 1,800 million, lower than 2012, while the value traded separately on the two
stock markets, foreign investors bought gross 315 million USD (nearly 6,650 billion VND).
Particularly 2014, total funds from foreign investors in Vietnam stock market were still
positive; although lower than last year. However, withdrawing capital from Vietnam was just
the temporary trend. Total FII bought stock is 4000 billion VND included 2,843 billion VND
on Hochiminh stock market and 1,110 billion VND on Hanoi stock market in 2014. In fact
Vietnam stock market, FII has always occupied a proportion of the whole market around 1015% and has an impact on the trend of VN-index and HNX-index.

In 2015, belong to ANZ forecast, hard to large expect on the outlook and volatility on the
stock market of Vietnam. Report on January 2015 of BSC, the foreign capital inflows
decrease sharply compared to the same period of 2014; net buying around 99 billion on HSX
11

and net sold around 178 billion on HNX. However, the investors can expect about room
allocation for foreign investors of the Vietnamese government and Government continued
equalization of state enterprises, it is likely that stock market will attract attention and VNindex will rise much.

80,000.00

70,000.00

68,315.30

60,000.00

50,000.00
43,700.50

40,046.80
40,000.00

35,372.00
32,427.70
29,265.80

30,000.00

32,427.70

25,879.30

20,000.00

10,000.00

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Although there are many authors who have conducted and concluded about the impacts of
liquidity, as Amihud and Mendelson (1986) shown that liquidity has significant impacts on
market return. Research by Mingfa Ding, Birger Nilsson and Sandy Suardi (2013) indicated
that there is a negative relationship between the participation of FII and market liquidity over
time. In reality, the characteristics of FIIs effects on financial markets as if financial market
grows, liquidity will be higher as attracting the interests of foreign investors. Moreover, FIIs
can help increase the capital of local enterprises, make businesses grow and enhance

12

competitiveness, this is the reason FIIs are very important for the local businesses, which are
undercapitalized.

Figure 1. Foreign Indirect Investment inflows into Vietnam Stock Market

(Source: State Bank of Vietnam Unit: billion VND)

1.2 Problem statement

The investment of foreign investors help the firm improve their ability in operating business,
encourage them to enhance their quality to attract more and more investors. Therefore, FII
has an important role for developing country, such as Vietnam, India or Malaysia. Analyzing
the activities of foreign investors to understand their influence to the stock market plays an
important role in this research. From that point, there are various solutions in order to exploit
and develop the positive impacts, as well as prevent and minimize the negative impact of
foreign investors. In addition, there are a few substantial researches about this relationship on
stock market. Therefore, these are critical reasons to examine the influence of FII on liquidity.

13

1.3 Research objectives

This research focuses on measuring the effect of FIIs activities to the market. By analyzing
the data collected and solving research problems, this study has some objectives as:

1. To make an overview about the impacts of FII on liquidity of Vietnam stock market.
2. To give some descriptive statistics and analyze the relationship between FII and
liquidity of stock market in Vietnam.
3. To draw the conclusion and suggest recommendations about the effect of FII to
Vietnam stock market.

1.4 Research questions

Based on the purpose of finding out the impacts of foreign investors on liquidity and some
objectives above, the research aims to answer two questions:

- Do FII affects Vietnam stock markets liquidity?

- How does foreign sector impact on liquidity of Vietnam stock market?

1.5 Research scope

The target of this research is to investigate the impacts between FII and liquidity in stock
market of Vietnam. The database that used in this research includes the daily trading of
foreign investors from 01/01/2010 to 30/06/2015 based on the data of HOSE.

1.6 Methodology and data overview

In this paper, the method mainly use is quantitative approach with secondary data from stock
market of Hochiminh Stock Exchange (HOSE). Besides, author also use data from some
previous researches and related theory will also be employed to determine the most suitable
theoretical framework.
14

In addition, the researcher will use statistical software to run some statistical test. For
example, to test the hypothesis to determine the impact or run some model as VAR, Granger
Causality and Impulse Response Function (IRF) to check the theoretical framework.

1.7 Conclusion
In summary, chapter 1 shows an overview about the topic research, in which introduces the
important role of foreign sector and their influence on the stock markets liquidity. The
research will answer the question How does foreign sector impact on liquidity of Vietnam
stock market? This question would support to find evidences and give some
recommendations for investors in Vietnam stock market. In addition, helping investors keep
away from negative impacts or suddenly shock of market. This chapter also indicate about the
structure, methodology and data of thesis.

1.8 Thesis outline

The research include five main chapters:

Chapter 1: Introduce about the topic background, identify the research objective,

research question, the research scope and methodology.

Chapter 2: Review of literature related to the research question and selected

theoretical model(s) applied in the study.

Chapter 3: Illustrates the methodology applied to carry out the research
Chapter 4: Present data analysis and model; analysis and discussion of findings

relative to the literature review.

Chapter 5: Summary the data and keys that answer the research objectives and give
some useful recommendations.

Besides that, appendix and reference are also presented in the end of research.

15

CHAPTER 2: LITERATURE REVIEW

2.1 Review stock market of Vietnam
2.1.1 Stock Exchange introduction
From 2007, Vietnam has two main official Stock Exchanges called Hochiminh Stock
Exchange (HOSE) and Hanoi Stock Exchange (HNX). Securities are evidences confirming
the rights and legitimate interests of the owners of assets or capital of the issuers. Securities
shown in the form of certificates, book entry or electronic data, including the following
categories as stocks, bonds, fund certificates or rights to purchase shares, warrants, options,
put options, futures contracts, securities or indices.

In the current situation of economy, the stock market is conceived of as the place where the
trading activities of medium and long-term securities. The acquisition is carried out in both
primary market and secondary market. The Initial Public Offering of bonds and stocks to
investors is done in the primary market and succeed trading is done in the secondary market.

16

Thus, the stock market is the place where the exchanges, trade, transfer of securities occurs,
thereby changing the securities holders.

Stock Exchange has a variety of functions and highly important roles for the economic
development of a country. The stock exchange has function of attracting idle capital invests
for development, integrating world economy or adjusting macro situation. Creating and
raising capital for the national economy is a role of stock exchange through selling shares to
the investing public. The other role of stock exchange is creating conditions for enterprise to
: Current price of the stock i

use capital more efficiently

and flexibility,
example
give the
opportunities
for small
: Outstanding
volumefor
(volume
listing)
of stock
i
: Price of share i in the base period

investors to take part :inOutstanding

the growth ofvolume
large companies
by buying an amount of shares. Stock
of stock i in the base period
market is also a business assessment tool and predicts future, through the stock market, firm
can adjust the stock price fluctuations or maintain the stock indexes which are the indicators
of the general trend in the economy.

Index formula

On 11-7-1998 Government signed Decree No. 48/CP issued on securities and stock market
and Vietnam stock market was born. Hochiminh City of Trading Center (HoSTC) is
established under Decision No 127/1998 / QD-TTg dated 07/11/1998, and in Hanoi on
03/08/2005. The first transaction of HoSTC started on July 28th 2000 there were just two

17

firms listed: Saigon Cable & Telecommunication Material Joint stock company (SAM) and
Refrigeration Electrical Engineering Joint stock company (REE). Through 7 years,
Vietnamese stock market has significantly increased amount of company listed, market
capitalization and trade volume. Additions, stock market also had some fluctuations, such as
the Vietnamese stock index (VN-index) reached its peak in March 2007 but then declined.
After that, there was a rapid decline in the investors trust in Vietnam stock market. The
market has started gaining back the investor trust since the middle of 2009. Through 14 years
VN-Index reached the top at 1.170 points on 12th March 2007 and after 7 years this number
just goes around 600 points.

On 30th June 2014 amount of trading transaction was 1,977,047 billion VND, the
government investment trade transaction was 250,596 billion VND.

80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-

Total Foreigner Buy Value

Buy - Sell Value

18

Total Foreigner Sell Value

Figure 2. FII activities in Vietnam Stock Market from 2007 to 2014

(Source: HOSE Unit: billion VND)
2.1.2 History and developments of Viet Nam Stock Market
Period 2000 - 2006: The capital of 2 listed company was 270 billion VND and it had some
government bonds are traded. From then until 2005, the market is always in a state of
drowsiness, eliminate fever in 2001. Awakening stage appearance gradually from 2005 when
the proportion held by foreign investors was raised from 30% to 49% (excluding the banking
sector). By the end of 2005, total value of Vietnam stock market reached nearly 40,000
billion VND. Vietnam stock market had 4.500 billion VND shares, 300 billion VND fund
certificates and 35,000 billion VND of government bonds, local government bonds, and
attracted 28,300 trading account. In 2005, growth of the stock market doubled compared to
2004.The stock market grew spectacularly, with the VN-Index rose from 305 in 2005 to 751
at the end of 2006; the VN-Index equaled 246% compared with the VN-Index 2005. In 2006,
market growth rates jumped, 31/12/2006 number of shares listed in the stock HOSE is 106,
the market had 74 companies listed on HOSE, including the numbers of listed companies had
been particularly strong in the last two months. The scale of market capitalization also
19

increased significantly, while the total market capitalization reached VND 221,156 billion,
equivalent to 14 billion US dollars by 22.7% of GDP. The total market capitalization has
increased by 28.8 times in 2006.

Period 2007 - 2009: in 2007 the capitalization increased primarily due to the volume factors
more when there are new companies listed. As of 28/12/2007, the total market capitalization
of approximately 493 billion VND, accounting for 43% of GDP. In 2007, Vietnam joined in
WTO. HOSE has carried out 248 sessions with nearly 2.390 billion of the total volume of
securities, respectively worth 244,670 billion VND; averaging 986 billion VND/session. As
of 31/12/2007 with over 7,500 transaction accounts belonging to foreign investment volume,
increased 3 times compared to 2006. Foreign investors held from 25-30% of the shares of the
listed companies, trading revenue accounted for approximately 18% of the whole market.
Value their portfolios on the official market was estimated at $ 7.6 billion, more than 3 times
compared to 2006 ($ 2.3 billion); if you count the unofficial market, this figure is estimated to
reach nearly $ 20 billion. According to the State Securities Commission in Vietnam (SSC), in
2007 there were 179 companies licensed to offer 2.46 billion shares to the public,
respectively consisting of over 48,000 billion VND (25 times more than in 2006).

The global economic recession and the collapse of major international financial institutions in
2008 undoubtedly had seriously negative influence on the health of domestic securities
market. After hitting its all-time high of 1,171 points in March 2007, VN-INDEX plummeted
to the bottom of 235 points, the lowest point ever since 2006. From the position of the best
performance stock market in 2006, Vietnam was proclaimed to be the most risky stock
market in 2008 (Bloomberg, 2008).

20

VN-INDEX FROM 2007 - 2009

1,400

1,200

1,000

800

600

400

200

It was crowd psychology of Vietnamese investors that further made stock market down and
resulted in bigger losses (Nguyen.T, 2008). That showed the real that the investor have the
tendency to behave the same as majority of people without their own careful judgment or
consideration. In that time. Stock market was the emerging market, one-third of total was
securities investors and two-third was individual investors. The lack of experiences and
knowledge had affect them to imitate the crowd investment decisions. When the stock
market was overheated in 2007, witnessing the fact that number of people had made big
profit, individual investors hurried to make the Buy order, they even continued to purchase
stocks, regardless the warning that Vietnamese stocks exceeded its intrinsic value by 30% at
the end of 2007. As a consequence, when Vietnam stock market suffered crisis with
considerably decline in value and market capitalization, most of local investors were in
terribly panicking mood, they sold out stocks as fast as possible. With that massive capital
outflow, the stock market condition became seriously worse.

21

Figure 3. Vietnamese stock market VN Index from 2007 to 2009

(Source: HOSE)
Period 2010 present: With continuous support from Government, especially the stimulus
package of US $6 billion in late 2009 to stabilize macro-economic conditions, local securities
market gradually recovered. After constant fluctuations throughout 2010 and 2011, VN-Index
climbed to the level of 400 points in 2012. In the first months of 2013, the index is traded in
the range from 480 to 510 points. These signs of improvement, however, still are not enough
to re-establish investors confidence. The stock trading volume at the moment was merely
one third of that in 2007.

In 2014, Vietnam Stock Market have very positive situation, market development with
growth trend, although sometime alternating some down adjusted. VN-INDEX increased
strongly in early of 2014, then create bottom from early of March and middle of May with
508 points and up top at 644 points. After that, market entered a down cycle points, nearly
returned to the level of the first point in year. While, HNX also up top at 92.99 points.

22

To date 08.12.2014, VN-INDEX reached 571.68 points, increased 13.3% compare with the
end of 2013. The total transaction value of market reached 1,164 trillion VND, increased 90%
compare with 2013; Average transaction value per sessions reached 5,448 billion VND.
While, stock transaction value, average fund certificates per sessions reached 2,971 billion
VND, greater than 2.2 times compare with 2013.

Total mobilization of capital by Stock Market in 2014 reached 237 trillion VND, increased
6% compare with 2013 and contributed 27.1% to total social investment capital. Including,
total mobilization value through government bond issuance reached 214 trillion VND and
hold proportion 90% of total value of mobilization of capital.

In brief, Vietnam stock market experiencing 13-year history of development has grown
significantly and rapidly in both the number of stocks listed and value of market
capitalization. The movement of VN-Index, nevertheless, has shown unpredictable instability
over observed period (Figure 1.1). In addition, making investment decisions based on herd
mentality rather than professional strategies is still popular among Vietnamese investors,
especially

individual

23

700.00

600.00

500.00

400.00

300.00

200.00

100.00

0.00

investors.

24

Figure 4. The data of daily VN-Index from 2010 to 2014

(Source: HOSE)

2.2 Related concept

- FII: Foreign institutional investors is an investor or an investment funds. They belong to a
countries, but it is not countries which they are investment. FII include: hedge funds,
insurance companies, pension funds and mutual funds. Activities of Foreign institutional
investors are buying shares, stocks and bonds. FII has influence in a stock market through
Gross Sale, Gross Purchase and Net Purchase.

According to M.R Murthy (1999), FII could provide a high degree of liquidity and improve
the function of a stock market. In the research about the liquidity of stock market in China of
Mingfa D., Sandy Suardi (2013) stated that the appearance of foreign investors create an
effect on liquidity by changing the trading volume in the China market.

25

- Liquidity: It means ability which asset can convert to cash quickly and simply wherever
need it. It also is degree which asset or security can be bought or sold in market without affect
price of asset or stock.

- Stock market: a place that contain both primary and secondary market for investors. Provide
the environment to do all the activities of selling and buying stocks, bonds

- Net purchase: net purchase means when foreign investors have greater buying value than
selling value of stock. So, this variance is called net purchase value.

2.3 Literature of liquidity

Liquidity is simply understand as the ability to convert to money of an asset. The easier and
quicker convert into money, the higher liquidity of assets have. Market liquidity refers to the
capacity that executive the transaction without any significant impact on the stock price.
According some related research about measuring liquidity of Von Wyss (2004) or Crokett A.
(2008), market liquidity usually include four aspects as:

Market depth, the ability exercise large transactions without influencing prices;
Tightness, or the different between bid and ask prices. According to Von Wyss (2004),
tightness also can be seen as the degree of buying and selling asset in a specific time at

the same price.

Trading time, the time or speed of transactions that can be carried out at prevailing
price. Measuring trading time is used by the postpone time between the trades, the

quantity of trades in each time.

Resilience, or the ability to buy or sell assets with little impacts on price.

Liquidity is an important factor of a stock market, which used to measure the efficiency and
growth of market. It also a strong forecaster of economic growth, predicts future returns as
Bernnardo (2002) state. According to Amihud & Jones (2002), liquidity engaged in financial
26

analyzing process and helped in providing price forecasts as well as facilitating efficient price
establish in markets. Schmukler et al. (2007) indicated that liquidity is a very significant issue
for an investor when deciding which investments to take. Liquidity provides safety and lessen
the risk of losses in executing large volume transactions.

There are a number of attributes that can impact stock market liquidity, for example the
market return, volatility or participate of institutional investors. Wahal (1996) state that
institutional investors also play an important role in influencing liquidity and exist a relation
between them. Lakonishok et al. (1992) argued that the impact of foreign investors on stock
liquidity is reinforced by the influence of their trading on stock price. In addition, the room
allocation to international investors as well enhance local market liquidity.

Bekaert et al. (2007) exhibit an effect from the openness to foreign investors to liquidity in
emerging markets. Agarwal (2007) examined the relationship between institutional ownership
and liquidity of stocks, focusing on the effect of the institutions information advantage on
liquidity. He found evidence of a non-monotonic (U-shaped) relationship between the
fractions of a firms shares held by institutions and various measures of stock liquidity, and
showed that liquidity rises with increased institutional ownership.

Chordia, Roll, and Subrahmanyam (2000) studied the US market and concluded that liquidity
is not an asset specific attribute; rather, individual asset liquidity tends to be positively corelated to aggregate market liquidity. A market is liquid if the cost of buying or selling a large
number of shares on demand is low. This suggests that the costs of acquiring capital are lower
in more liquid markets. Thus, liquidity in the stock market has consequences for a firm's
financing/investment policies.

27

2.4 Liquidity measurement

Because there is no specific and widely accepted definition of liquidity, it is very difficult to
measure and capture liquidity. As a result, there are many ways to measure liquidity. In the
research named Measuring and Predicting Liquidity in the Stock Market (2004), Von Wyss
divided liquidity measurements into two methods: one-dimensional and multi-dimensional
measurement. One-dimensional liquidity measure means the researchers only focus on one
variable to measure liquidity, while multi-dimensional liquidity measure try to combine
different variables in one measure.

2.4.1 One-dimensional measurement

One dimensional often included four type of groups: the firm size, the related volume
measure, related time trading and the spread related liquidity measure.

The firm size will be measured by the market capitalization, which present the firm value in
the current market as:
M cap=Si Pi

Where

Si

is number of shares and

Pi

is the price of stock.

In the second group, the related volume included many ways to measure liquidity as trading
volume, turnover, depth, log depth and dollar depth and many other ways. Normally, turnover
is seem to be more popular and adequate because it provide a comparison between different
stocks in measuring liquidity. Turnover is calculated by the price in transaction i and the
quantity of share traded in transaction i by the formula:

28

Nt

Turnover(Tnt )= Pi Qi
i=1

When considering time trading to measure liquidity, Von Wyss (2004) focused on number of
transactions and number of orders, which refers to the number of orders placed for a specific
stock in a given time. High number of orders or transactions, high liquidity of the stock.

And spread related liquidity measure is the group present the different between bid prices and
ask prices with some methods as absolute spread, log absolute spread, relative spread and
effective spread. In reality, investors not only concern about the fees paid to stock market and
brokers in each transactions, but also interested in the cost that coincident executing orders.
The lower values of spread, the higher liquidity of stock.

2.4.2 Multi-dimensional measurement

As mentioned before, multi-dimensional measure refers to the combination different variables
to measure liquidity. There are also a variety of ways to measure liquidity by multidimensional, such as Depth for price impact, Market impact, Quote slope, Log quote slope
and Liquidity ratio 1,2,3 However, the most common way of using multi-dimensional to
measure liquidity is Liquidity ratio 1, which is used to develop illiquidity ratio by Amihud
(2002).

Liquidity ratio 1, also known as Amivest liquidity ratio describes how much turnover
corresponds to a unit change in the price. A high liquidity ratio means high liquidity.

p i qi
Tn t
i=1
LR 1=
=
|r|
|r|

29

Amihud illiquidity ratio (2002) or ILLIQ is reverse with liquidity ratio, which compare the
absolute price change of a stock to the turnover. A low Amihud ratio denotes the high
liquidity.
r
Tn t
1
ILLIQ=
=
LR 1

The liquidity of stock market is measured by the Amihud illiquidity ratio to assess the price
impact in the market. In the research of Shane & Paul (2011) were calculated turnover ratio,
examine the transaction cost and bid-ask spread in the market. Weekly average FII were
considered to estimate the impact of FII flows on the stock market. Then, weekly average
trading flows were computed from daily gross purchases, sales and net investments. The
researchers found that foreign trading extraordinary improved trading activities in India. FII
flows had a significant positive impact on the volume and value traded while gross purchases
and sales not only impacted market liquidity negatively, but were also found to have a
negative lead effect on future liquidity.

2.5 Literature of Unit root test

This research is using Vector Auto Regression (VAR) Model to find out the impacts of FII on
liquidity of Vietnam stock market. However, the condition to do this method is data have to
be stationary, the time series data is called stationary when mean value, variance and covariance (at different lag length) do not change with time; it means series follow a cycle that
we can identify if opposite the series is not stationary; and it is said to be nonstationary.

Nowadays, Unit root test is tool to test series stationary or not. There has five popular
methods to test stationary of data are Augmented Dickey-Fuller (ADF) was developed by
30

Dickey and Fuller in 1979; Dickey-Fuller Generalized Least Squares (DF-GLS) was develop
by Elliott, Rothenberg and Stock in 1996; Phillips-Perron (PP) was named after Peter C. B.
Phillips and Pierre Perron done their research in 1988; Kwiatkowski, et. al.(KPSS) was
introduced by Kwiatkowski, Phillips, Schmidt, Shin in 1992; and Ng and Perron (NP) in
2001.

In fact, ADF and PP test are close to estimate the stationary of times series data but it may
basically differ in finite samples by the different ways in which they evaluate for
autocorrelation in the test regression. Indeed, Schwert (1989) found that the result of ADF
and PP test are size distorted, it makes the result rejects the null hypothesis many times while
its true. In addition, the research of Caner and Killian (2001) also found that KPSS unit root
test has the same problem with ADF and PP test. So, they have low power to test the
stationary of time series.

In 1996, ERS unit root test was developed by Elliott, Rothenberg and Stock as the
modification of ADF method to mitigate the size distorted. Moreover, Ng and Perron (2001)
applied the procedures of GLS detrending of Elliott, Rothenberg and Stock to build an
efficient version of PP unit root test which also fixed their own problem about size distorted.
In summary, for maximum power of unit root test method, ERS and NP are efficient method
to test the stationary of time series data. Therefore, this research uses ERS unit root test to test
data stationary or not.

2.6 Literature of VAR

The VAR model known as Vector auto-regression are used to analysis and forecast the
multivariate time series. It is the model which generalized form of univariate autoregressive
model to dynamic multivariate time series. VAR models in economics were made popular by
Sims (1980). The definitive technical reference for VAR models is Lutkepohl (1991), and
31

updated surveys of VAR techniques are given in Watson (1994) and Lutkepohl (1999) and
Waggoner and Zha (1999). Applications of VAR models to financial data are given in
Hamilton (1994), Cuthbertson (1996), Mills (1999) and Tsay (2001). Besides that in 2012
Paul Chopra and Ajay Rajut also use this models to checks the stationary or non-stationary.
This model is simple and flexible. The users do not worry about how determine which are
endogenous variable and exogenous variables. All the variables in VAR is endogenous
variables. The single estimate is OLS method can be applied to each separate equation
displacement. The forecast by this method is better than other forecast which calculated from
simultaneous equations model complex. VAR models is the useful tool to test the correlation
between 2 factors FIIs and liquidity.

2.7 Literature of Granger Causality

Granger Causality Testing was developed by Clive Granger in 1969, which is describe the
causal relationship between variable in the econometric model. It is one of the good features
of VAR model because of the ability of one variable to predict the other (Asteriou, 2007).

The basic concept of Granger Causality is that if variable X contains useful information for
predicting variable Y, then variable X causes Y. That is X is Granger causality of X. There are
four cases of causality: Unidirectional causality from X to Y, Unidirectional causality from Y
to X, Bilateral causality, or feedback, Independence.

2.8 Liquidity empirical research

Although there are several studies have found that the impact of foreign sector on stock
market parameters such as market return, volatility, but there is a little prior research
examined the impact of foreign sector on liquidity of stock market.

32

In 2009, S. Ghon Rhee, Jianxin Wang have used daily stock trading of listed firm in
Indonesia stock market in the period 2002-2007, it includes daily holdings of investors,
volume of trading, value of trading, bid ask prices, high, low and closing prices. Based on
this data set, they used it to measure liquidity by three methods, which are bid-ask spread,
price sensitivity and market depth. By using Granger causality testing to examine the
relationship between foreign institution investment and liquidity, S. Ghon Rhee and Jianxin
Wang (2009) concluded that foreign investments have a negative impact on liquidity of
Indonesia stock market. This study stated that if foreign holdings increase 10% in the current
month, it would lead to bid-ask spread increase by approximately 2%, market depth drop by
3% and price sensitivity rise by 4% in the next month.

In recently, Prasanna and Bansal (2014) investigate the relationship between Foreign
Institutional Investment and liquidity of India stock market. In order to examine this effect,
they collected daily data of gross sales, gross purchase and net investment as proxies for FII.
Besides that Prasanna and Bansal have applied several methods to measure liquidity such as
trading volume, turnover, turnover ratio, illiquidity ratio and spread. Based on these proxies,
they used OLS regression estimates to find out the correlation coefficients of FII and liquidity
measures. Moreover, in order to understand more clearly the causes and effects relationship
between FII flows and liquidity of stock market Prasanna and Bansal also applied Granger
causality to test and the result show that net investment has a significant positive impact on
liquidity whereas higher gross purchases and gross sales have substantial negative impact.

33

No. Report name

The Role of
Foreign
Blockholders
in Stock
Liquidity: A
CrossCountry
Analysis

Authors

Year

Nation

Dependent
variable
- The
average
percentage
effective
spread
-Percentage
relative
spread for
firm i in
month t

Lilian Ng,
Fei Wu,
Jing Yu, and 2011
Bohui
Zhang

- Amihuds
illiquidity
ratio
- Turnover

Foreign
Institutional
Investors and
Stock Market
Liquidity in
China: State
Ownership,
Trading
Activity and
Information
Asymmetry

Result of the
research
Liquidityi,t = 0 +
1F Oi,t1 +2Ret
12mi,t + 3RV oli,t +
4ADRi,t +
5Indexi,t+6DYi,t
+ 7BMi,t +
8Sizei,t + Other
controls + t,
Negative and
Positive Relationship
between foreign
block ownership and
stock liquidity

-The relative
quoted
spread (QS)
Mingfa
Ding,
Birger
Nilsson,
Sandy
Suardi

2013

China

34

-The relative
effective
A negative
spread (ES) relationship exists
between the
- Amihud
participation of
(2002) price foreign institutional
impact
investors and market
measure
liquidity over time.
(ILLIQ).

Foreign
institutional
ownership
and stock
market
liquidity:
Evidence
from
Indonesia

Rhee, S.
Ghon, and
Jianxin
Wang

Foreign
Institutional
Investment in
Indian
Capital
Market: A
Study of Last
One Decade

Daily data of Vietnam stock market

Narendra
Singh
Negative and
2011 India
Bohra and
Positive relationship.
Database
Akash Dutt

-Bid-ask
spread
Indonesia

-Price
sensitivity
-Market
depth

Gross
sale
Do Foreign
FIIs
Gross
purchase
Institution
Chishen
purchases
5 Net
Improve

Stock
Liquidity

2009

Wei

2010

USA

- Amihud
Liquidity
Turnover
(2002)
price
(Amihud
2002)
trading
Positive Volume
and
impact
Negative relationship
measure
(ILLIQ).

General testing process

2.9 Conceptual Framework

The negative
liquidity impact of
institutional investor
ownership in
developed markets.

VAR

Granger causality

Impact of FII

35
Recommendations

Figure 5. Theoretical framework

(Source: authors)

CHAPTER 3: RESEARCH METHODOLOGY

3.1 Methodology Overview

36

3.1.1 Research Philosophy

According to Paul Flowers (2009), when authors do a research, it is important to consider
different research paradigms and matters of ontology and epistemology to develop the
knowledge and nature of knowledge. All research is based on assumptions about human
knowledge, the nature of the realities in research and how can understand it. The philosophy
will give us the overview of the topic.

There are four types of philosophy, namely: Pragmatism, Positivism, Realism and
Interpretivism. Pragmatism argues that in research, it must have a specific answer for the
actual question. Researchers have to base on the knowledge and theory was accepted before
to solve the problem of research topics by using the authentication result realistic. Positivism
confirmed that accuracy knowledge springs from the empirical testing. When the author using
Positivism, the research will accept the theory of the author before, then arguments and make
correct statements about what the researcher pursue. Realism is related to scientific enquiry.
Nature of realism is the senses lead to the truth. Two type of realism is direct realism and
critical realism. Interpretivism said that it is necessary for researcher to understand the
different between roles of humans through social vision position.

In this study, the researchers based on available theories, then collected secondary data and
analyzed the impact of FII to liquidity in Vietnam stock market to prove and develop these
theories. Besides that, researcher made some assumption about some factors in our theoretical
framework and modeling. Thus, pragmatism is the most appreciate method for purposes and
characteristics of this research.

37

3.1.2 Nature of Research

According Saunder et al (2009), there are 3 kinds of study: exploratory, explanatory type and
descriptive to analyze variables. Explanatory is used when exploring new things; to connect
the ideas to explain why or how the problems happen. Exploratory is based on hypothetical or
theoretical to further research, which was used when the authors has data. With exploratory
authors seek to look for patterns of data to understand deeply about topic. Descriptive is more
about to gain an accurate profile of issue. Descriptive require authors to have a theory to used
database in the correct direction.

This research follows the impact of FIIs on liquidity of Vietnam stock market. First of all,
providing the overall of Vietnam stock market. Then analyzing elements of each factor: FIIs
and liquidity. Next using the Eviews software and financial method to explanatory nature to
squash the research question. Then reviewing and investigating the correlation between
variables by statistical test like regression to get the acknowledgment about the research. So,
researchers combine 2 types: exploratory and descriptive together to get the main purposes.

3.1.3 Research Approach

In this part, there are two methods to approach a study, these are: Inductive approach and
Deductive approach. Inductive approach collects data; then building the pattern in order to
find out the conclusion.

Inductive
Specific examples or activities

Generalization

Deductive

Figure 6. Research approach (Source: authors)

38

According to Aristotle (2010), the knowledge reached through inference. There want
inference must be the premise and that premise was accepted. Therefore, there is a premises
relationship with very clear conclusions. Deductive approach of Aristotle (2010) that moves
from the general to the particular or general rules applying particular rules.

Francis Bacon (2002) gave a different approach about knowledge said that to gain new
knowledge must come from the private information to the general conclusion, this method
called inductive method. This method allows us to use the personal premises, is the
knowledge that has been accepted as a means to gain new knowledge.

It means deductive approach that moves from the general to the particular or general rules
applying particular rules. Thus, deductive approach is suitable for this research. This
approach tends to give a realizable results said by Babbie (2010). Beside that deductive
approach is often linked with the quantitative research with the expertise. For doing this
thesis, researcher choosing this approach to test against the variables and find out the
relationship between them.

3.1.4 Research Method

Under the current situation, market research methodology divided into qualitative and
quantitative analysis. Qualitative research is approach to exploration, described and explained
based on the survey means experience, perception, motivation, intends, behavior, attitudes. In
qualitative research, data should be collected primarily in the form of qualitative. Quantitative
research is the researchers use different methods to measure, reflect and interpret the
relationship between some factors together. It is applicable for factors can be expressed in
numerical. It is shown by figures collected immediately during the survey, these numbers
may be in continuous variable or incoherent.

39

For this topic, quantitative research is the most accurate methods. Quantitative method for the
secondary data from HOSE stock market is more compatible and accurate. The researchers
use different methods to measure, reflect and interpret the relationship between some factors
together. For detail, authors gather numerical data, then using formula and model to measure,
compare and give specific conclusions about the impact of FII to liquidity in Vietnam Stock
Market.

3.1.5 Research Strategy

The research strategy is general plan how adopting to reply the research question and guide
the choice of research question and thesiss objective said by Saunder (2009). There are five
strategies: experiments; case study; survey; archival; and historical research. Based on the
research questions and objectives, archival research strategy is the best for this study. The
reason is researchers access the administrative records and documents to collect database
such as daily price, VN Index, trading volume from 2010 to middle 2015 on the official data.
Archival allows authors to concentrate on the correlation and effects of variables in HOSE.
Thus, archival strategy is meet researchs objective which will be adopted to define the
impact of FIIs on liquidity of Vietnam stock market.

3.1.6 Time horizon

Time horizon is the length of time for a project what observing. Cross-sectional and
longitudinal studies are two types of time horizon. According to Saunders et al. (2009), the
cross-sectional, which also call snapshot at a particular time. In the other hand, longitudinal
takes a series of snapshots or a diary to represent events over a given period. Advantages of
longitudinal time are tending to research about the changes of development. The sample for
longitudinal is the way to analyze the past return database for given stock to help researchers

40

have a clear view about the Vietnam stock market. Thus, in this study authors use
longitudinal and the data is collected in 5 years period from 2010 to middle of 2015.

3.2 Data Collection Method

This research collects data directly from the website of HOSE: http://www.hsx.vn and the
website of Stockbiz Portal: http://www.stockbiz.vn which are covered in 5 years and 6
months from 4th January, 2010 to 30th June, 2015. From the databases, researchers get daily
data is related to VN-index, foreigners trading and the market capitalization.

The total observations are 1374. All collected data will described in table on Excel file, it is
listed out day by day from 4th January, 2010 to 30th June, 2015 as below:

Closed price of VN-Index

Total trading volume of VN-Index

Total trading value of VN-Index

Total buy volume of foreigners

Total buy value of foreigners

Total sell volume of foreigners

Total sell value of foreigners

3.3 Process of analyze

In this research, VAR model is the main model to test the impacts of FII on liquidity. The
requirement of VAR model is the stationary of variables, so first of all, the researchers need
to test whether the variables are stationary or not by using Unit root test before applying VAR
41

model. In this step, the researchers chose Phillip-Persons Test to check the stationary of
variables after considering among many unit root test methods. Then, lag-length is another
requirement of VAR model to identify the relationship between FII and market liquidity.
Akaike Information Criterion (AIC) will be used to identify the lag-length in this paper. After
that, the Granger Causality Test will be applied to find out whether liquidity has any effect on
Gross Purchase, Gross Sale or Net Purchase of foreign investors.

Figure 7. Process of analyze (Source: authors)

3.4 Data Analysis Methods

3.4.1 Unit Root Test
As this research mentioned in chapter two, the main condition before applying VAR model or
Granger Causality, unit root test is use to test of stationary or non-stationary This research
will conduct ERS test to do the unit root test. The hypotheses of this test are:
H0

: Y has unit root meaning that variable is not stationary

H1

: Y do not have unit root meaning that variable is stationary

42

If the test statistic is lower than the critical values at the significant level 1%, 5% and 10%,
H0

cannot reject. On the contrary, If the test statistic is higher than all of the critical

values at a significance level 1%, 5% and 10%,

H0

will be rejected and accept

H1

After determining the time series is stationary, this research can apply VAR model. However,
in some case, the time series data is not stationary at level, the research have to transform
non-stationary time series into stationary at 1st difference or 2nd difference.

3.4.2 VAR Model

VAR model known as vector auto regression model which is a generalized form of univariate
autoregressive model for forecasting a series of variables. In other words this is a vector of
time series variables. VAR estimates each equation bases on the lag length of variable (p) and
other variables in a simple way. The model used to define the correlation between FIIs and
Amihud (presented for liquidity):

m=1

m=1

FII t = + m AMI t m+ m FII t m+ 1 t

m =1

m=1

AMI t = + m AMI t m + m FII tm + 2t

'

In which:
AMI T

: Amihud liquidity ratio on day t

FII: Foreign indirect investment: gross sales; gross purchase, net purchase on day

43

'

t , : Constant

, , , : Correlation coefficients

k: number of lags that has been analyzed

1t , 2t

: zero-mean white noise disturbances

Assuming that each equation includes lag length values include: (k) lag length for both FII
and liquidity as variable to regression. In this case, using OLS to estimate each equation.
With () is the random error, it also called thrust or innovation in VAR language.

With some of the lag length variables, each coefficient will no statistically significant,
possibly due to multicollinearity. In regression coefficients FII, there are only the FII which
has lag length is 2 is statistically significant, while the remaining coefficients cannot.
Addition, the result in the regression of Liquidity is same to FII.

3.4.3 Choosing Lag Length

Lag length is a value that use to forecast the lag of independent variables based on the lag of
other dependent variables. Omer Ozcicek and W. Douglas McMillin (1999) stated that
specify lag length is a critical factor in the estimation of VAR models. Ltkepohl (1993)
found that in comparison with true lag length, choosing a higher order of lag length can cause
an increase in the mean square forecast errors and generate autocorrelated errors when
choosing lower order of lag length. Hafer and Sheehan (1989) find that the different in lag
lengths could make the accuracy of forecasts from VAR model changes significantly.

44

In this research, the authors choose Akaikes information criterion (AIC) is a tool to estimate
lag length of VAR models.

3.4.4 Granger Causality

In order to find out the cause and effect of two stationary variables, the study will often asked
question: Is it liquidity (Y) that causes FII (X) or is it the FII that causes liquidity of Vietnam
stock market. The pair of regression involves estimating causality:

Y t 0+ ki=1 i Y ti +kj=1 i X t j+ t

X t 0 +i=1 i X t i+ j=1 i Y t j + t

(3.1)

(3.2)

To determine whether causal relationship between X and Y variable or not, the authors will
test hypothesis for each equation above:
H 0= 0= 1 = 2== k =0

H 0= 0= 1= 2== k =0

Using F-statistic of Wald test to investigate null hypothesis, if F-statistic is higher than critical

value at the significance level,

H0

will be rejected and reverse. According to Gujarati

(2004), there are four probabilities:

45

Unidirectional causality from X to Y is exists when the estimated coefficient of X is

statistically different from zero (

different from zero (

i 0

) and estimated coefficient of Y is not statistically

i=0

Unidirectional causality from Y to X is indicated if the estimated coefficient of X is not

statistically different from zero (

different from zero (

i=0

) and estimated coefficient of Y is statistically

i 0

Bilateral causality, or feedback is happened when the estimated coefficient of X and Y are

statistically significantly different from zero in both equations (

i 0,

i 0

Independence is suggested when the estimated coefficient of X and Y are not statistically

different from zero in both equations (

i=0,

i=0

3.4.5 Amihud Illiqudiity

This study based on Amihud illiquidity measure (2002) to identify the impact of FII on
liquidity. The method of Amihud included three main steps. First of all, the researchers will

collect data of Vietnam stock market to calculate Turnover (

Nt

Turnover(Tnt )= Pi Qi
i=1

46

Tnt

) as the formula below:

In which, turnover is daily trading volume in VND, Pi is price in transaction i and Qi is the
quantity of share traded in transaction i.

Then, the researchers will come to calculate the daily return of stock in market by the
equation:

R=log

In detail,

P1

P1
P0

( )
is the closed price of today and

P0

is the closed price of the day before.

After that, the Amihud Illiquidity ratio will be calculated by the absolute daily return and
turnover as the formula:
R
Tnt
ILLIQ=

3.5 Detections for regression model

3.5.1 Autocorrelation
When the time series data is affected by its own signal in the past, it is called autocorrelation
or serial correlation. This means that an error had been existed at period t may be had again to
the next period t+1. And autocorrelation usually occurs in time series data.

According to Mwirigi Kiula, 2014, there are three main reasons to have autocorrelation are
omitted variables, misspecification and systematic in errors measurement.

Omitted variables arises in case of the model C depend on 2 variables are A and B, but the
real number only has A or B, so C just affected by A or B, so it is called omitted variables. In
47

many time series data, the thing that lack some series is existing usually because of statistic,
so omitted variables is the popular reason for autocorrelation; Suppose A is related by B and
squares of C, but the real calculation wrongly assume only B and C, so this mistake is called
misspecification. Systematic in errors measurement is usually happens when the system is
updated and some of data cannot update like the others, so it makes the hold systematic
doesnt link to each other.

When the data has autocorrelation inside, OLS estimators are still linear and unbiased, but the
result is not the best, it is inefficient. The regression coefficients are also unbiased; it makes
standard errors of regression coefficients underestimate; and the range of confident interval of
t-statistics and F-statistics are bigger.

There are two popular ways to detect autocorrelation are graphical method and formal tests
(Mwirigi Kiula, 2014). With formal tests in Eviews, it has the Durbin Watson Test, the
Breusch-Godfrey Test, and the Durbins h Test (for the presence of lagged dependent
variables). This research uses the Durbin Watson test to detect autocorrelation and fix it for
the best estimation which integrates in unit root test result, when the Durbin Watson test is
bigger than 2, times series have no autocorrelation and opposite.

3.5.2 Multicollinearity
Muticollinearity arises when two independent variables have a high correlation. It exists
which makes the result of regression model wrongly by changing the standard error.
Collinearity (or multicollinearity) is the undesirable situation where the correlations among
the independent variables become stronger than the others (Central Michigan University,
2014).

48

Multicollinearity can be caused by use incorrectly of dummy variables (like exclude wrong
category); include an independent variable that is computed from other independent variables
in the equation (A = B + C, and the regression includes both A, B and C) or use one variable
twice times but in different unit of measure (High in feed and high in meter)

The equation of t-statistics is

tstatistics=

Estimated coefficient
Standard error

And the absolute of t-statistics and p-value is always opposite. It means, when the
multicollinearity increases the standard error, it makes t-statistics decrease. Therefore, pvalue will increase. In addition, when p-value is higher than 5% (0.05), the variables become
insignificant while it may be not insignificant. So, multicollinearity makes the result after
estimation worse.

To detect the multicollinearity, Eviews provides a tool to run correlations analysis using all
independent variables in the estimate equation to test is there exist multicollinearity or not.
After detect the problem, once that has high correlation will be drop it out from the equation
and run this model again to have the final result.

In this document, each equation just uses one variable to test the impact to the dependent
variable is liquidity of Vietnam stock market. So, this research doesnt have multicollinearity.

3.5.3 Heteroscedasticity
When doing regression for many variable observations, the Mean Standard Errors (MSE) is
calculated for the efficient of linear regression, regression is good when MSE is low and not
good when MSE is high, and variances of regression are also proportional to MSE.
49

Heteroscedasticity arises when the variances of regression are not stable. It means
observations distribute with no trend and the result of regression is not efficient.

To detect the heteroscedasticity in estimated regression, there have several tests to know
heteroscedasticity exist (Mwirigi Kiula, 2014), for example as The Breusch-Pagan LM Test,
The Glesjer LM Test, The Harvey-Godfrey LM Test, The Park LM Test, The GoldfeldQuandt Tets, and Whites Test. This document uses White test to find heteroscedasticity if
regression model with the null hypothesis of the test is there is no heteroscedasticity (or
homoscedasticity). After detect the heteroscedasticity, Hossain Academy, 2011 suggested that
data should convert into log and run the model with log variables; heteroscedasticity will be
removed and it becomes homoscedasticity.

3.6 Ethical Consideration and Limitation

Belong to Saunders et al, 2012, the ethics in research are the factors should be aware when
doing the research (Saunders et al, 2009). Ethical principles have been developed to realize
any of ethical issues that arise in various approaches to research.

All of data was requested be solely for the research intention. Source of data is acknowledged
and available in public domain that is taken from Hochiminh stock market (HOSE).

Ethical issues related to the analysis and reporting process: ensuring that the data is not
distorted and erroneous. Data will be analyzed and reported in honestly way and secured
actions to edit data to get the good results. Besides that, from an ethical standpoint, first of
all we ensure that the results of the research would be useful. Our thesis respect and comply
with all relevant policies. Thesis report respect all copyright laws cited documents and paper.
Using data from reliable sources, books, magazines and reference material that all the
information in the report is valid.
50

Before making any conclusions about this thesis, these may have some limitations. As an
external party, this research focuses on the impact between FIIs and liquidity of Vietnam
stock market. Thus, the researcher may not collect full database because the stock market in
Vietnam still develops and finishes. Author effort to investigate this topic. Due to limitations
of essays, the research may not provide a sustainable explanation but it could serve as a guide
for future in-depth studies.

51

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