NATIONAL ECONOMIC UNIVERSITY

SYSTEMATIC

RISK
CASE STUDY
BETA COEFFICIENT OF VN30 COMPANIES IN
THE YEAR 2018 - 2022

Members: Pham Trong Quan - 11214966

Vo Minh Quang - 11215022
Le Tran Minh Quang - 11214995
Nguyen Nhat Huy - 11212619
Ngo Tien Dat - 11219217
Trinh Vu Long Hai - 11212017
Nguyen Trong Thinh - 11215516

LECTURER: VU THI THUY VAN

GROUP 3 - CORPORATE FINANCE 63E 2023

 TABLE OF CONTENTS
1. Overview of systematic risk ..................................................................................... 2
2. Case study: Effect of herd behavior on the Vietnam stock exchange in the
period from 2018 to 2022 ............................................................................................. 8
2.1. Herd behavior .............................................................................................................................. 8
2.2. The situation of Vietnam’s stock market from 2018 to 2022 (Divide into 3
periods, specific data to see the changes clearly) ................................................................. 10
2.2.1. Before Covid (2018)....................................................................................................... 10
2.2.2. During Covid (2019,2020) ........................................................................................... 13
2.2.3. After Covid - 2021,2022 (link to the events of FLC, Tân Hoàng Minh, Vạn
Thịnh Phát)..................................................................................................................................... 19
2.3. Summary .................................................................................................................................... 25
3. Advice for managing the herd behavior in order to control systematic risk .... 26

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1. Overview of systematic risk

1.1. Theory about Systematic risk

1.1.1 Definition of systematic risk

- Systematic risk, also known as non - diversifiable risk, volatility risk, or market
risk, affects the overall market, not just a particular stock or industry., refers to the
inherent uncertainty and potential for financial loss that is associated with the overall
market or economy as a whole. It is a type of risk that cannot be eliminated through
diversification because it affects all investments in a particular market or asset class.
- Systematic risk is that part of the total risk that is caused by factors beyond the
control of a specific company or individual. Systematic risk is caused by factors that are
external to the organization. All investments or securities are subject to systematic risk
and, therefore, it is a non-diversifiable risk. Systematic risk cannot be diversified away
by holding a large number of securities.
1.1.2. Types of systematic risk
Systematic risk includes market risk, interest rate risk, purchasing power risk, and
exchange rate risk.
- Market Risk
Market risk is caused by the herd mentality of investors, i.e. the tendency of investors
to follow the direction of the market. Hence, market risk is the tendency of security
prices to move together. If the market is declining, then even the share prices of good-
performing companies fall. Market risk constitutes almost two-thirds of total systematic
risk. Therefore, sometimes the systematic risk is also referred to as market risk. Market
price changes are the most prominent source of risk in securities.
- Interest Rate Risk
Interest rate risk arises due to changes in market interest rates. In the stock market, this
primarily affects fixed income securities because bond prices are inversely related to
the market interest rate. In fact, interest rate risks include two opposite components:
Price Risk and Reinvestment Risk. Both of these risks work in opposite directions. Price
risk is associated with changes in the price of a security due to changes in interest rate.
Reinvestment risk is associated with reinvesting interest/ dividend income. If price risk

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is negative (i.e., fall in price), reinvestment risk would be positive (i.e., increase in
earnings on reinvested money). Interest rate changes are the main source of risk for
fixed income securities such as bonds and debentures.
- Purchasing Power Risk (or Inflation Risk)
Purchasing power risk arises due to inflation. Inflation is the persistent and sustained
increase in the general price level. Inflation erodes the purchasing power of money, i.e.,
the same amount of money can buy fewer goods and services due to an increase in
prices. Therefore, if an investor’s income does not increase in times of rising inflation,
then the investor is actually getting lower income in real terms. Fixed income securities
are subject to a high level of purchasing power risk because income from such securities
is fixed in nominal terms. It is often said that equity shares are good hedges against
inflation and hence subject to lower purchasing power risk.
- Exchange Rate Risk
In a globalized economy, most companies have exposure to foreign currency. Exchange
rate risk is the uncertainty associated with changes in the value of foreign currencies.
Therefore, this type of risk affects only the securities of companies with foreign
exchange transactions or exposures such as export companies, MNCs, or companies
that use imported raw materials or products.

1.1.3. Determinants of systematic risk

Systematic risk is caused by factors and events that are beyond the control of individual
investors or companies. These factors can include:
- Economic Factors: Changes in the overall economic environment, such as
recessions, inflation, interest rate fluctuations, and changes in consumer spending
patterns, can impact the value of investments across the market.
- Political and Regulatory Factors: Government policies, geopolitical events, and
changes in regulations can influence market conditions and affect the performance of
investments.
- Market Sentiment: Investor sentiment, market psychology, and trends in
investor behavior can lead to market volatility and systemic risk. For example, panic
selling during a market crash can exacerbate systematic risk.

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- Natural Disasters: Events like earthquakes, hurricanes, or pandemics can have
widespread economic consequences and impact various industries and sectors
simultaneously.
- Systemic Financial Events: Banking crises, credit market disruptions, and
financial system failures can have a cascading effect on the entire financial market,
causing systemic risk.

1.1.4. Systematic risk calculation

● Literature review of CAPM

The Capital Asset Pricing Model (CAPM) is a widely used financial framework that
describes the relationship between the expected return of an asset and its systematic
risk, often measured by beta. The concept of beta and the development of the CAPM
can be traced back to several key research contributions in finance and economics.
Here's a brief literature review outlining the origins of beta and the CAPM:

-Harry Markowitz - Mean-Variance Analysis (1952): While not directly related to the
CAPM, Harry Markowitz's groundbreaking work on mean-variance analysis laid the
foundation for modern portfolio theory. Markowitz introduced the idea of
diversification to manage risk in a portfolio of assets. His work highlighted the trade-
off between risk and return, which is a fundamental concept in the development of the
CAPM.

- William Sharpe - Capital Asset Prices: A Theory of Market Equilibrium under

Conditions of Risk (1964):William Sharpe's work was pivotal in the development of the
CAPM. He introduced the concept of the security market line, which relates the
expected return of an asset to its beta. Sharpe formulated the CAPM equation, which is
the basis for pricing assets according to their systematic risk. In this paper, he introduced
the term "beta" to represent the sensitivity of an asset's returns to market movements.

- John Lintner - The Valuation of Risk Assets and the Selection of Risky Investments
in Stock Portfolios and Capital Budgets (1965): John Lintner extended Sharpe's work
and provided empirical evidence for the CAPM. He demonstrated that the risk-return

4
relationship described by the CAPM held up in real-world financial markets, supporting
the idea that beta was a crucial determinant of expected returns.

-Eugene F. Fama and Kenneth R. French - The Cross-Section of Expected Stock

Returns (1992): Although not the original developers of the CAPM, Fama and French's
work expanded our understanding of asset pricing models. They proposed the three-
factor model, which added size and value factors to the CAPM, suggesting that beta
alone might not fully explain asset returns. This research led to further discussions about
the limitations of the traditional CAPM.

These are some of the key contributions to the development of beta and the Capital
Asset Pricing Model. Over time, the CAPM has evolved and been subject to various
critiques and refinements, but it remains an important theoretical framework in finance
for understanding the relationship between risk and expected returns in financial
markets. Researchers continue to explore and adapt asset pricing models to better reflect
the complexities of real-world financial markets.

So as we can see, systematic risk is that part of the total risk that is caused by factors
such as economic, political, and social factors. It can be captured by the sensitivity of a
security’s return with respect to the overall market return. This sensitivity can be
calculated by the β (beta) coefficient.
The Beta of a stock or portfolio measures the volatility of the instrument compared to
the overall market volatility. It is used as a proxy for the systematic risk of the stock,
and it can be used to measure how risky a stock is relative to the market risk. Then, to
calculate systematic risk, we calculate the covariance between the market index return
and asset return. The term covariance identifies how the asset prices fluctuates in
relation to changes in the market. The estimated equation is given below.

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Rp is the return on a particular security while RM is the market return. It can be observed
that β is the regression coefficient of Rp on RM. The intercept term α shows a security’s
return independent of market return..

The β coefficient is calculated by regressing a security’s return on market return. The

value of β can be calculated using the following formula:

When used as a proxy to measure systematic risk, the β value of a portfolio can have
the following interpretation.

● When β = 0 it suggests the portfolio return is uncorrelated with the market return.
● When β < 0 it suggests the portfolio return has an inverse correlation with the
market return.
● When 0 < β < 1 it suggests the portfolio return is positively correlated with the
market return however with smaller volatility.
● When β = 1 it suggests that the portfolio return has a perfect correlation with the
market portfolio return.
● When β > 1 it suggests that the portfolio return has a positive correlation with
the market, but would have price movements of greater magnitude.

1.2. VN30 companies

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N N
o Symbol Name o Symbol Name

Saigon Beer - Alcohol -

ACB Asia Commercial Bank SAB Beverage Joint Stock
1 16 Corporation

Saigon – Hanoi
BCM Becamex IDC Corp SHB Commercial Joint Stock
2 17 Bank

Joint Stock Commercial

Southeast Asia
Bank for Investment and
BID SSB Commercial Joint Stock
Development of
Bank
3 Vietnam 18

SSI Securities Joint Stock

BVH Bao Viet Group SSI
4 19 Company

Vietnam Joint Stock Saigon Thuong Tin

CTG Commercial Bank for STB Commercial Joint Stock
5 Industry and Trade 20 Bank

Vietnam Technological
FPT Joint Stock
FPT TCB and Commercial Joint
Company
6 21 Stock Bank

PetroVietnam Gas Joint Tien Phong Commercial

GAS TPB
7 Stock Corporation 22 Joint Stock Bank

Joint Stock Commercial

Vietnam Rubber Group
GVR VCB Bank for Foreign Trade of
- Joint Stock Company
8 23 Vietnam

Ho Chi Minh City

Vinhomes Joint Stock
HDB Development Joint VHM
Company
9 Stock Commercial Bank 24

7
 Vietnam International
Hoa Phat Group Joint
HPG VIB Commercial Joint Stock
Stock Company
10 25 Bank

Military Commercial Vingroup Corporation -

MBB VIC
11 Joint Stock Bank 26 Joint Stock Company

MaSan Group Joint VietJet Aviation Joint

MSN VJC
12 Stock Company 27 Stock Company

Mobile World Vietnam Dairy Products

MWG Investment Joint Stock VNM Joint Stock Company
13 Company 28

Vietnam Petroleum Vietnam Prosperity Joint

PLX VPB
14 Group 29 Stock Commercial Bank

PetroVietnam Power Vincom Retail Joint Stock

POW VRE
15 Corporation 30 Company

- VN30 is a list of 30 listed companies on Ho Chi Minh City Stock Exchange

(HOSE), which have the highest amount of market capitalization and also highest
amount of liquidity on the market. In particular, these companies make up for 80% the
amount of market capitalization and 60% amount of transaction value on the market.
- Reasons for using VN30 companies to do the case study: Because of the variety
of areas (banks, real estate, securities,...) → See the effect of systematic risk on the
whole market.

2. Case study: Effect of herd behavior on the Vietnam stock exchange in the
period from 2018 to 2022

2.1. Herd behavior

In economics, herd behavior refers to a phenomenon where individuals or market

participants make decisions or take actions based on the actions of others, rather than

8
relying on their own independent analysis of available information. This behavior is
often observed in financial markets and can lead to trends, bubbles, and market
inefficiencies.

Some key characteristics of herd behavior in economics include:

● Imitation: People engage in herd behavior by imitating the actions or choices of

others, especially when they perceive those actions as popular or successful.
● Lack of independent analysis: Participants in a herd often make decisions
without conducting their own research or analysis of the underlying fundamentals. They
rely on the decisions of others as a shortcut.
● Fear and Greed: Herd behavior is often driven by emotions, particularly fear and
greed. When people see others profiting from a particular investment or asset, they may
feel compelled to join the herd to avoid missing out.
● Risk of information cascades: In a herd, individuals may follow others even if
they possess private information that suggests a different course of action. This can lead
to cascading effects where everyone follows the initial trendsetter.
● Conformity and social pressure: The desire to conform to social norms and avoid
being an outlier can drive individuals to participate in herd behavior, even when they
have doubts about its rationality.

Herd behavior can have both positive and negative consequences. On the positive side,
it can lead to efficient information dissemination and coordination in markets. However,
it can also result in market inefficiencies, bubbles, and panics when individuals make
decisions based solely on the actions of others, without considering the fundamentals.
In extreme cases, such behavior can contribute to financial crises. Economists and
policymakers often study and try to understand herd behavior to mitigate its potentially
harmful effects on markets and the economy.

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2.2. The situation of Vietnam’s stock market from 2018 to 2022 (Divide into 3 periods,
specific data to see the changes clearly)

2.2.1. Before Covid (2018)

Company Beta Q1 Beta Q2 Beta Q3 Beta Q4 Beta

Market

1 ACB 1,4 1.54 1,57 1,55 1

2 BCM 0,73 0,87 1

3 BID 1,35 1,55 1,66 1,58 1

4 BVH 1,56 1,52 1,55 1,41 1

5 CTG 1,64 1,63 1,69 1,71 1

6 FPT 0,86 0,84 0,83 0,85 1

7 GAS 1,56 1,44 1,54 1,51 1

8 GVR 0,83 1

9 HDB 0 0 1,01 0,95 1

10 HPG 0,81 0,89 0,87 0,93 1

11 MBB 1,07 1,18 1,28 1,26 1

12 MSN 1,06 1,1 1,1 1,19 1

13 MWG 0,66 0,57 0,61 0,72 1

14 PLX 1,4 1,47 1,49 1,5 1

15 POW 2,09 1

16 SAB 0,75 0,71 0,64 0,41 1

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 Company Beta Q1 Beta Q2 Beta Q3 Beta Q4 Beta
Market

17 SHB 1,36 1,41 1,31 1,29 1

18 SSB 0 0 0 0 1

19 SSI 1,25 1,35 1,32 1,33 1

20 STB 1,02 1,11 1,2 1,2 1

21 TCB 0 0 0 0 1

22 TPB 0 0 0 0,42 1

23 VCB 1,57 1,47 1,4 1,36 1

24 VHM 0 0 0,87 1

25 VIB 1,35 1,83 1,86 1,89 1

26 VIC 1,35 1,2 1,14 1,08 1

27 VJC 0,71 1,04 1,06 1,07 1

28 VNM 0,69 0,64 0,64 0,72 1

29 VPB 0,81 1,2 1,2 1,28 1

30 VRE 0 1,07 1,17 1,22 1

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The line graph depicts the point scores of five distinct entities, Q1, Q2, Q3, Q4,
representing various banks and companies, alongside a market trend line. The
visualization showcases a notable similarity among these entities, as their trends run
parallel and exhibit a proportional relationship to the market trend. Observing the lines
representing Q1, Q2, Q3, and Q4, it's evident that their point scores closely track each
other, with marginal differences.

Despite each line signifying a different entity, their performance remains consistently
aligned over the given period. This synchronization suggests a strong correlation or a
similar response to market influences. Additionally, the resemblance to the market trend
line indicates that these entities are significantly influenced by broader market
fluctuations. Their movements mirror the market trend closely, displaying a
proportional and direct relationship with market shifts.

This parallel movement and proportional correlation between the entities and the market
imply that they respond similarly to market conditions. While individual variations
exist, their overall performance and directional shifts exhibit a strong connection to the
broader market dynamics.

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Overall, the graph demonstrates a remarkable similarity in trends among the entities,
suggesting a proportional and interconnected relationship with market changes.

2.2.2. During Covid (2019,2020)

Ticker symbol Beta 2019 Beta 2020 Market

1 ACB 1.55 1.22 1

2 BCM 1 -0.37 1

3 BID 1.59 1.36 1

4 BVH 1.32 1.52 1

5 CTG 1.66 1.22 1

6 FPT 0.86 0.84 1

7 GAS 1.61 1.42 1

8 GVR 1.16 1.1 1

9 HDB 1.33 1.53 1

10 HPG 0.95 1.12 1

11 MBB 1.16 1.1 1

12 MSN 1.17 0.98 1

13 MWG 0.75 1.22 1

14 PLX 1.46 1.02 1

15 POW 1.2 0.73 1

16 SAB 0.45 1.09 1

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 17 SHB 1.23 1.38 1

18 SSB 0 0 1

19 SSI 1.4 1.37 1

20 STB 1.1 1.06 1

21 TCB 1.32 1.22 1

22 TPB 0.41 0.57 1

23 VCB 1.31 1.16 1

24 VHM 1.18 1.11 1

25 VIB 1.74 1.31 1

26 VIC 1.07 0.78 1

27 VJC 0.96 0.91 1

28 VNM 0.7 0.67 1

29 VPB 1.28 1.26 1

30 VRE 1.32 1.54 1

Ave Beta 1.14 1.036 1

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a. Identify herd behavior

2020 posed unprecedented challenges to financial markets worldwide due to the

COVID-19 pandemic. The VN30 index, representing the top 30 companies in Vietnam's
stock market, was not immune to these disruptions. One notable observation during this
period is that the beta of 22 companies within the VN30 saw a slight decrease, while
the remaining companies experienced an increase in their beta values.

Generally, the beta of most companies was greater than 1, implying that stocks
were more sensitive to market movements. When the market rises, these stocks tend to
rise more, but they also fall more when the market declines. During the COVID-19
pandemic, some companies experienced a surge in beta, likely due to their exposure to
the changing economic landscape. The prevalence of companies with betas greater than
1 may suggest a herd behavior in a rush to invest in high-beta stocks, with investors
seeking outsized returns, hoping to capitalize on market upswings and potentially
contributing to market bubbles.
The minority of companies, such as FPT, VIC, VNM, TPB,... kept their beta
lower than 1 and higher than 0. With stable and diversified business models, financial

15
strength, market leadership, and risk management practices, they became less sensitive
to market movements, making them attractive to risk-averse investors during economic
instability. As a result, from a flight to safety, investors tended to seek refuge in these
lower-beta stocks collectively.
As opposed to most VN30 companies, the only negative beta of BCM in the VN30 in
2020 was quite unusual and significant. A negative beta implies an inverse relationship
with the broader market; when the market goes up, the stock goes down, and vice versa.
To sum up, a lower beta in 2020 than in 2019 would suggest that Vietnamese investors
became less herd-like in 2020. This could be due to several factors:
● Increased awareness of the risks of herd behavior: The COVID-19 pandemic and
the resulting market crash may have made investors more aware of the risks of following
the crowd.
● Increased availability of information: Investors now have access to more
information than ever before, which can help them to make more informed investment
decisions.
● Investors became more risk-averse in 2020 and shifted their portfolios towards
less volatile assets. This would have led to a decrease in the demand for riskier assets,
such as VN30 companies, which would have resulted in a decrease in their beta.
Vietnamese investors becoming less herd-like was a positive development for the
Vietnamese stock market. Investors are becoming more rational and are making more
informed investment decisions. This could lead to a more efficient and stable market.
However, it is essential to note that there are also some potential downsides to reduced
herd behavior. For example, it could lead to increased volatility in the market, as
investors are more likely to trade based on their assessments of the market. It could also
make it more difficult for companies to raise capital, as investors may be less likely to
invest in companies not following the crowd.

b. Impact on VN30’s firm performance (2019-2020)

Fluctuations of VN-Index and VN30-Index since the beginning of 2020:

16
Although only 11/30 codes in the VN30 group have had positive growth since the
beginning of the year until now, the increase is very strong.
At the end of the trading session on October 16, VN-Index stood at 943.3 points,
equivalent to a decrease of 1.8% compared to the end of 2019 (960.99 points). However,
the VN30-Index has regained all its lost ground, standing at 901.59 points, 22.53 points
(2.56%) higher than the end of last year and only 7.5 points lower ( 0.8%) before Lunar
New Year 2020 - before the stock market was affected by the Covid-19 epidemic.
After getting off to a good start in nearly the first month of 2020 when reaching 909.09
points, the VN30-Index plunged along with the general market due to the impact of the
Covid-19 epidemic and bottomed at 610.76 points on April 11, 2020. March 31,
corresponding to a loss of 30.5% compared to the beginning of the year and 32.8%
compared to the time before the Covid-19 epidemic.
However, the inflow of "F0" investment money has helped the market recover very
quickly. The recovery momentum of the VN30-Index was strongest in early April to
May and tended to adjust during June and July. From August until now, this index has
17
continuously increased despite its rapid growth. The increase was slower than the
previous recovery but liquidity skyrocketed. Since the trading session September 25 to
October 16, the matching volume of VN30-Index has always remained at over 100
million shares/session - the longest since the beginning of 2020.
Although only 11/30 codes in the VN30 group have had positive growth since the
beginning of the year until now, the increase is very strong. The main driving force of
the VN30-Index's increase comes from stocks such as Hoa Phat (HoSE: HPG),
VietinBank (HoSE: CTG), Masan Group (HoSE: MSN), Vinamilk (HoSE: VNM), SSI
Securities (HoSE : SSI)... In which, HPG increased by 51.4% from 19,225 VND/share
to 29,100 VND/share, CTG increased by 49% from 20,900 VND/share to 31,150
VND/share, VNM increased by 14% from 94,332 VND /share to 107,400 VND/share.

On the contrary, the most disappointing stock in this group was FLC Faros
Construction's ROS (HoSE: ROS) with a decrease of up to 87.2% from 17,300
VND/share to only 2,210 VND/share. ROS's capitalization also dropped to 276th
position in the entire market with only 1,283 billion VND. The three largest stocks with
market capitalization, Vingroup (HoSE: VIC), Vietcombank (HoSE: VCB), and
Vinhomes (HoSE: VHM), have not yet returned to the price level at the end of 2019.
Among them, VIC also decreased by 15%. and VHM decreased by 9.2%.

It can be seen that, although the unpredictable developments of covid 19 have had a
significant impact on crowd trends, leading to ineffective performance of the VN30
group at the end of 2019, however, the situation has changed more positive when "F0"
investors contributed positively to the market recovery, especially in the period from
April to July. However, because of negative information about Covid 19 at the end of
the year In 2020, the room for the market to continue to grow is forecast to no longer
be too large.

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2.2.3. After Covid - 2021,2022 (link to the events of FLC, Tân Hoàng Minh, Vạn Thịnh
Phát)

Herd behavior is difficult to eliminate, but it can be reduced when information about
listed companies and macro policies are fully and transparently disclosed. Not receiving
enough information in a transparent and clear way can easily cause investors to lose
direction, creating herd behavior. The lack of information transparency of many
businesses participating in the stock market is "fertile land" for bad intentions to take
advantage of. Many businesses take advantage of the lack of information transparency
to get profit in the stock market. Bad information, widespread noise. Rumors are used
to spread so that bad guys can manipulate the market.
In the past 2 years 2021-2022, Vietnamese stocks have witnessed many ups and downs.
The market encountered continuous shocks like the arrest of senior leaders at FLC, Tan
Hoang Minh and Van Thinh Phat groups, affecting the sentiment of individual investors
who account for 90% of the total of trading accounts. Other factors included rising
interest rates and tightened credit for high-risk segments, including real estate and
securities.
FLC case
On January 10, 2022, Mr. Quyet directed the sale of more than 76.7 million FLC shares
and matched 74.8 million orders at an average price of 22,586 VND/share but did not
disclose information before the transaction. The total amount of money Mr. Quyet
earned after illegally selling shares was 1,689 billion VND, accounting for 55.42% of
the total market volume, accounting for 10.54% of the total circulating volume of FLC
shares. This caused FLC stock price to fall to the floor for 8 consecutive trading
sessions, initially determined to cause serious damage to investors who bought 60.1
million FLC shares on the stock exchange on January 10, 2022, affecting the operations
of Vietnam's stock market.
Tan Hoang Minh, Van Thinh Phat case
Truong My Lan and her company Van Thinh Phat Holdings Group allegedly issued and
traded bonds worth trillions of dong (tens of millions of dollars) without registering
them with the State Securities Commission and without disclosing the risks and

19
financial information to investors. The bonds were sold at high interest rates, attracting
many investors who were unaware of the true nature of the bonds. The bond proceeds
were then used to acquire state-owned land plots at prime locations in Ho Chi Minh
City, violating the law on land management and causing losses to the state budget.

No Ticker symbol Beta 2021 Beta 2022 Market

1 ACB 0,56 1,07 1

2 BCM -0,39 0,87 1

3 BID 1,33 1 1

4 BVH 1,49 1,03 1

5 CTG 1,38 1,32 1

6 FPT 0,92 0,87 1

7 GAS 1,3 0,85 1

8 GVR 0,78 1,77 1

9 HDB 1,26 1,07 1

10 HPG 1,08 1,48 1

11 MBB 1,22 1,39 1

12 MSN 0,92 1,06 1

13 MWG 0,84 1,06 1

14 PLX 0,95 1,06 1

15 POW 1,1 1,23 1

16 SAB 1,08 0,37 1

20
 17 SHB 1,24 0,81 1

18 SSB 1,73 0,55 1

19 SSI 1,5 1,73 1

20 STB 1,32 1,4 1

21 TCB 1,3 1,44 1

22 TPB 0,85 1,14 1

23 VCB 1,1 0,84 1

24 VHM 1,01 0,86 1

25 VIB 0,58 1,34 1

26 VIC 0,69 0,47 1

27 VJC 0,73 0,2 1

28 VNM 0,6 0,45 1

29 VPB 1,45 1,34 1

30 VRE 1,39 1,14 1

Ave Beta 1,09 1,08 1

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a. Identify herd behavior

In general, in the period of 2021-2022, the average beta of VN30 is greater than 1,
proving that vn30 has fluctuations in the same direction and is stronger than the
fluctuations of the market. This can be explained by evidence of residual effects from
covid19 and price manipulations affecting stock market operations. There are 18 out of
30 stock codes in the VN30 group that have a beta index greater than 1 in both years,
contributing mainly to the fluctuations of vn30 during this period and having high
ability to meet systematic risk. The remaining stock codes still maintain stable growth
following the market's movements, demonstrating good business performance.. Only
BCM tends to fluctuate opposite to the market's volatility with beta < 0. Herd behavior
appears at large amplitude, beta > 1 with high profits accompanied by high systematic
risk. The evidence is the actual figures on the stock market in 2021-2022 as follows:
In the last months of 2021, the stock market witnessed an explosion of investment cash
flow from F0s. There are many reasons, such as the epidemic stagnating production,
low bank interest rates, so the stock market attracts idle cash flow from the people...
And more noteworthy, there are signs of baiting, "inflating stock prices". Many people
seemed to be under a spell. Because almost every participation is profitable. 1 for 10,
10 for 1 hundred, thus setting a record for the stock market. The number of new

22
participants in the stock market, according to data from the Securities Depository
Center, in December 2021 reached a record with 226,580 units. For the whole of 2021,
individuals opened more than 1.53 million new securities accounts, nearly 4 times more
than in the whole of 2020. Many economic experts believe that Vietnam's stock market
has developed to a new level, which helps attract cash flow from different classes in
society in the context of production and business stagnation due to Covid-19. The wave
of new individual investors entering the market is one of the important factors
contributing to the strong growth of liquidity in recent times.
VN30 stock price in 2021-2022

By the end of 2022, the number of domestic securities investors accounts for 6.8% of
Vietnam's total population, far exceeding the government's target of 5%. According to
statistics, in the first 11 months of 2022, the total number of newly opened investment
accounts reached 2,487,665 accounts, of which domestic individual investors opened
2,483,124 new accounts. The number of new accounts opened in the first 11 months of
2022 is 1.5 times higher than the record level of new account openings recorded in 2021.
Thanks to the record number of new investors participating, the market continues to
have huge liquidity sessions in the first 3 months of 2022. However, the majority of
new investors had to experience a period of strong adjustment in stock prices and the
number of newly opened accounts decreased rapidly in the last 2 quarters of the year.

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2022. In the second half of 2022, the individual corporate bond market witnessed
widespread psychological "shock" when investors witnessed incidents occurring at Tan
Hoang Minh Group and Van Thinh Phat or FLC. Declining confidence combined with
the liquidity of cash flow to pay bond debt of many businesses facing difficulties has
caused this market to increase risk.

b. Impact on VN30 firm’s performance

The table shows that a decrease of over 20% appeared in 18 stocks. Among them, the
"champion" who lost points was named SSI stock code of SSI Securities Joint Stock
Company. The negative developments of the general market turned the group of
securities companies into the focus of strong selling pressure, and SSI is a typical
example. The market price is currently falling to the lowest trading area since March
2021, reaching 19,800 VND/share (September 30 session). Thus, compared to the
beginning of the year, SSI prices have decreased by 58%. Compared to the peak price
of 50,500 VND at the end of 2021, the market price has "evaporated" by nearly 61%.
Rubber giant GVR stock is also one of the large capitalization codes heavily affected
by the sell-off wave that swept through the market in the first half of the year, and in
September it also continued to decline. This stock has just experienced many sharp
declines, resulting in a loss of more than 7% in the market price after 3 months of the
third quarter. In total, after 9 months, GVR's price lost 43% to 19,850 VND/share.

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Capitalization also decreased by more than 64,200 billion VND (~2.8 billion USD) in
the first 3 quarters of the year. Two giants in the real estate and steel groups, Vingroup's
VIC and Hoa Phat's HPG, are still deep in a series of sharp declines. VIC shares in the
September 29 session even fell to the lowest price in nearly 5 years, since December
2017, when the session ended at 54,600 VND/share. Compared to the beginning of
2022, VIC shares lost up to 46% of their value after 9 months of trading. HPG's decline
also caught attention. This stock ended the session on September 30 at 21,200
VND/share, equivalent to a decrease of 40% since the beginning of the year. Compared
to the peak reached at the end of October last year, HPG has lost more than half of its
market value.
Mr. Petri Deryng, founder and manager of PYN Elite Fund, affirmed that: "When the
storm passes, the sky will shine again." Petri Deryng believes that emerging economies
that have stocks that are not overvalued, affected by weak global market sentiment,
were able to quickly recover from shocks to new highs thanks to solid earnings growth.
Accordingly, Vietnam stocks were already too cheap but of course further declines are
still possible due to weak global sentiment, but Vietnam's stable economy and
sustainable earnings outlook will push the stock market to quickly rebound, once
uncertainty subsides.

2.3. Summary

This study contributes to behavioral finance literature in the following respects. Firstly,
consistent with the previous studies on the Vietnamese stock market, our findings
confirm and extend the evidence for the existence of investors’ herd behavior affecting
the Beta Coefficient of VN30 companies from January 2018 to December 2022. These
findings are robust for measuring the sensitivity of the company compared to the overall
market. 2 years after the outbreak of COVID-19, the average beta of VN30 companies
decreased slightly. This indicates that VN30 companies became less volatile and had a
lower correlation with the market in 2020, which can be linked to herd behavior.
Moreover, in the after-COVID period, Vietnamese stocks have witnessed many ups and
downs. The market encountered continuous shocks like the arrest of senior leaders at

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FLC, Tan Hoang Minh and Van Thinh Phat groups,rising interest rates and tightened
credit for high-risk segments, including real estate and securities. Those events seriously
affected the decision-making of individual investors who account for 90% of the total
of trading accounts. As a result, herd behavior harmfully affected the Stock Market.
Secondly, participants on the HOSE showed irrationality during the third wave of the
COVID-19 (period after COVID-19) outbreak with herd behavior detected. Thus,
Vietnamese policymakers have to be concerned about potentially destabilizing effects
on the HOSE (the largest stock exchange in Vietnam). Thirdly, the third wave of the
COVID-19 pandemic was unprecedented and affected Vietnamese markets
considerably, with a serious impact on HCMC. The reliable information to HOSE
investors might be limited and combined with high investors’ fear might have led to
them imitating the behavior of others or relying too much on public behaviors,
consequently, leading to mistakes in the valuation and trading of stocks. Moreover,
results show that excessive investors’ fear during the third COVID-19 pandemic
outbreak became more extreme during the declining market phase.
Our empirical results encourage investors to be vigilant and to avoid imitating others’
behavior in the face of crisis, as this accelerates investment risks. Investors should be
equipped with fundamental investment knowledge, be careful with available
information flows, and analyze information thoroughly before making investment
decisions in turmoil. Further, the usage of derivative contracts may help investors hedge
risks caused by unexpected shocks in the stock market.

3. Advice for managing the herd behavior in order to control systematic risk

Our findings suggest several implications for policymakers, security investors, security
firms and government during both usual and unexpected market conditions in Vietnam.
It has clearly shown the effect of herd behavior on the Stock market and financial
performance of VN30. In conclusion, when facing unexpected events security investors
together with other security agents should carefully before making decisions in order to
avoid herd behavior. Therefore, the effect of systematic risk on the security market can
be reduced. Here are some advice for both security investors and other agents.

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3.1. Advices for individual investors

● Determine risk appetite

Risk and profit are often in a favorable ratio, consultants accept large risks when starting
to invest in startups, and small capitalization stocks are more likely to gain large profits.
Determining each individual's risk will work to proceed with the investment stock
selection process.
● Research stocks thoroughly before starting your research
Investors are careful not to make investments without prior research or proof of why
the stock is attractive to buy. Investors can refer to Warren Buffett's investment value
methods or Canslim stock selection method to find good stocks before investing.
● Monitor investment accounts
Tracking information helps consultants make timely adjustments to the investment
portfolio, avoiding errors or benefiting from the above information.
● Diversify your portfolio
This type of chemical aid minimizes the risk of individual stocks and provides a profile
of risk similar to systematic risk.
● Invest with discipline
Going through the decision to set the rules first helps the advisor control the biggest
mistakes and helps have a clear direction in investing.
We cannot reduce systemic risk by diversifying our stock portfolio. The reason is that
once the systematic risk factor has impacted the entire market, combining investments
in many different stocks, in many industries, will all be negatively affected by the
market. The best way to avoid systemic risk is to look to invest in the broader market.
For example, instead of investing in stocks, you can buy USD or hoard gold.

However, with open funds, the investment scope is listed stocks, so fund managers will
not have too many tools to eliminate this risk because open funds can only invest in
listed securities. Some of the fund manager's tools include: holding a larger proportion
of cash, hedging risks with derivatives positions (if allowed).

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3.2. Advices for other security agents
● The State Securities Commission should issue more detailed policies to increase
information quality and transparency, fostering investor confidence in official
announcements by enterprises.
● The government should impose severe sanctions for insider trading, price
speculation, and manipulation to create a safer investment environment. Thirdly,
policies should be implemented to improve investors’ analytical skills and knowledge
to make informed decisions.
As individual investors make up the majority in Vietnam’s stock market, the
government should enact policies to protect their interests.

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