Foreign ownership and stock return volatility – Evidence from Vietnam

• We investigate the impact of foreign ownership on stock price volatility in Vietnam.
• We use different estimation techniques to control for possible endogeneity.
• We find that foreign investors stabilize the stock price volatility in Vietnam.

This paper examines the effects of foreign ownership on the firm-level volatility of stock returns in Vietnam. We use a detailed panel data set of firms listed on the Ho Chi Minh City stock exchange for the period from 2006 to 2012. Employing different econometric estimation techniques for panel data analysis, our empirical results show that firm ownership by foreign investors decreases firm stock price volatility in Vietnam stock market. The result implies the stabilizing role of foreign investors in emerging stock markets and this can be considered as one of the potential benefits of increasing the exposure of domestic stock markets to foreign investors.