The Impact of Monetary Policy on Stock Returns in Vietnamese Stock Market

Understanding the impact of monetary policy on stock returns is crucial to making investment decisions in the stock market. In this paper, I analyzed the impact of monetary policy and the movement of stock returns, using the Vector Auto-Regression approach (VAR) and focusing on the relationships between stock returns, inflation rate, exchange rate and interest rate in Vietnam. The result shows that the stock returns could be well forecasted by using the past information of monetary policy. The analysis of impulse and response of stock returns illustrate that the monetary policy has a small contribution into the innovations of the stock returns and the shocks from monetary policy to stock returns mostly affect stronger in the second month when the own shock of stock returns reduces