Perspectives Internal Market Risk on Abnormal Market Transaction

Perspectives Internal Market Risk on Abnormal Market Transaction

Nguyen Cao Anh

University of Nguyen Tat Thanh
ncanh@ntt.edu.vn

Abstract

The research suggests a new look for internal market risk to cause financial crisis when the expected market return is above the distribution of profitable cashflows on abnormal market transaction. The methodology uses three key characteristics of market price: stochasticity, equilibrium, and persistency to explain two states of equity ownership and speculation for capital asset pricing and give the critical value of profitability maximization. The paradigm uses daily data of Vn-Index, a market index of Hochiminh City Stock Exchange HOSE) to analyze internal market risk on abnormal market transaction to explain two key financial crises in 2007-2009 and 2021-2022.

Keywords: Capital Structure, Financial Crisis, Expected Market Return, Market Cycle, Market Risk.

Introduction

In the context, this research provides a new look of capital asset pricing for testing internal market risk so that most financial crises are due to the sudden shortfall in the real cashflows on the abnormal market transaction to make the empty space of buying stocks on the Stock Exchanges in market uptrend crashes. Global financial crisis in period 2007-2009 is typical evidence to the end of a market cycle and a recent market risk after Covid-19 could cause the next financial crisis when the activities of speculation and banking system expansion are stronger the activities of real economics to formulate the inefficacy of financial leverage at market level in capital market. To give a paradigm of capital asset pricing for testing internal market risk on abnormal market transaction, the author shows some key limitations of the CAPMs due to the absence of real cashflows, a key factor of capital asset pricing:

Limitation 1. Percentage flat of all financial assets in the CAPMs

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