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An application of a R2 dcomposed linkage method to explore a comtemporal and lead connectedness between investor sentiment and exchange rate dynamics in vietnam

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Quality & Quantity
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Trung‐Thanh To at National Economics University
Trung‐Thanh To
Le Thanh Ha
Le Thanh Ha
Le Thanh Ha
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Employing the R² decomposed linkage methodology, our study endeavors to elucidate interrelations, particularly distinguishing between concurrent and delayed connections. This novel approach is utilized to scrutinize the transmission mechanism of returns between the Investor Sentiment Index (ISI) and VN Index (VNI), as well as the five most frequently exchanged foreign currencies vis-à-vis the Vietnamese Dong, namely USD/VND, EUR/VND, GBP/VND, JPY/VND, and CNY/VND. The investigation spans from January 1st, 2017, to November 25th, 2023. It is discerned that delayed connections exert a more pronounced influence across all instances. Investment sentiment exhibits a relatively constrained impact on shocks, regardless of its role as a transmitter or receiver, with its significance primarily manifesting through lagged relationships. Three distinct time periods showcase the conspicuous net shock receiver effect of investment sentiment: the latter part of 2018, the latter portion of 2019 to early 2020, and the initial half of 2023. In aggregate, the COVID-19 epoch witnesses an escalated significance of investment sentiment. Notably, the net shock transmitter function of investment sentiment predominates solely during intervals encompassing the latter part of 2017 to the early part of 2018 and the latter segment of 2020.
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Vol.:(0123456789)
Quality & Quantity (2025) 59 (Suppl 1):S231–S259
https://doi.org/10.1007/s11135-024-01979-7
An application ofaR2 dcomposed linkage method toexplore
acomtemporal andlead connectedness betweeninvestor
sentiment andexchange rate dynamics invietnam
ToTrungThanh2· LeThanhHa1
Accepted: 4 September 2024 / Published online: 19 September 2024
© The Author(s), under exclusive licence to Springer Nature B.V. 2024
Abstract
Employing the R2 decomposed linkage methodology, our study endeavors to eluci-
date interrelations, particularly distinguishing between concurrent and delayed connec-
tions. This novel approach is utilized to scrutinize the transmission mechanism of returns
between the Investor Sentiment Index (ISI) and VN Index (VNI), as well as the five most
frequently exchanged foreign currencies vis-à-vis the Vietnamese Dong, namely USD/
VND, EUR/VND, GBP/VND, JPY/VND, and CNY/VND. The investigation spans from
January 1st, 2017, to November 25th, 2023. It is discerned that delayed connections exert a
more pronounced influence across all instances. Investment sentiment exhibits a relatively
constrained impact on shocks, regardless of its role as a transmitter or receiver, with its sig-
nificance primarily manifesting through lagged relationships. Three distinct time periods
showcase the conspicuous net shock receiver effect of investment sentiment: the latter part
of 2018, the latter portion of 2019 to early 2020, and the initial half of 2023. In aggregate,
the COVID-19 epoch witnesses an escalated significance of investment sentiment. Nota-
bly, the net shock transmitter function of investment sentiment predominates solely during
intervals encompassing the latter part of 2017 to the early part of 2018 and the latter seg-
ment of 2020.
Keywords Investor sentiment· Exchange rate volatility· Vietnam· Uncertain times· A R2
decomposed linkage method
JEL Classification C22· C51· D53· H1
* Le Thanh Ha
halethanh.kt@gmail.com
To Trung Thanh
thanhtt@neu.edu.vn
1 Department ofResearch Management, National Economics University, Hanoi, Vietnam
2 National Economics University, Hanoi, Vietnam
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
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