An Empirical Investigation of Liquidity and Stock Returns Relationship in the Emerging Market During the COVID-19 Outbreak: Evidence from Vietnam

The purpose of this paper is to investigate the relationship between liquidity and stock returns in the Vietnam stock market during the COVID-19 outbreak. This study uses panel-data regression models to evaluate the influence of market liquidity on stock returns of 656 listed non-financial companies in Vietnam. One notable finding in this study is the significant and positive influence of market liquidity on stock returns during the COVID-19 outbreak. Simultaneously, during lockdowns, the impact of market tightness on stock returns was significantly positive and stronger than in the pre-lockdowns. The study also discloses that there exists a significantly positive nexus between market liquidity and stock returns for all sectors, but with varying degrees of influence. In addition, the study also shows that the market liquidity of large market capitalization stocks experiences a significantly more positive effect on returns than small market capitalization stocks.