Question 1:

1. Stock market: asymmetric information between listed companies and

investors.

a. Impact on the stock market:

   In the stock market, asymmetry occurs when: enterprises hide unfavorable
information, exaggerate beneficial information...; enterprises provide unfair
information to investors; enterprises after issuing shares do not focus on
production and business investment but only focus on "making prices" on the
stock market; there is a leak of inside information; some investors create virtual
supply and demand in the market, leading to misrepresenting the value of
enterprises; some bad guys spread false rumors to businesses; the media provide
false information; Financial intermediaries provide and process inaccurate
information… 

Asymmetric information cannot provide accurate information and

indications for investment decision-making. Causes investors to misjudge risk so
they demand higher expected returns -> funding costs increase. Impact on the
choice between internal and external financing, between new issuance of debt
securities and equity securities -> The flexibility in the choice of sources of
financing of enterprises decreases. Increases the risk of hedging costs of the
business. Conflicts arise between shareholders and managers, creating an owner-
representative problem, resulting in an increase in agency costs. Facilitating
managers for personal gain, facilitating price manipulation….

On the other hand, in the stock market, there is a phenomenon of fraud

people who have no or little knowledge of securities and economics. Besides,
there are also some people who have the ambition to get rich from stocks. That
causes asymmetry between the two sides to create a disparity, thereby
manipulating the market and taking advantage of the trust of small players to
"embrace money and run away". Profitable stock investment is not a matter of a
day or two. Individual investors should actively learn more knowledge and
experience, especially keep a cool head to screen and receive accurate
information, avoid the big waves of the market.

Information asymmetry will lead to investors making incorrect investment

decisions, causing virtual supply and demand, a bubble market, and the potential
risk of market collapse. For example, businesses "hide losses" on financial
statements. Hiding losses will make investors believe that this business is
operating profitably and decide to invest in shares. However, hiding losses at the
present time in the financial statements makes the enterprise use profits in the
future to make up for the previous virtual increase, and then, the recorded profit
does not grow, the stock has no motivation. price increases, investors will have
"long slips".

Vietnam's stock market is still young, the information efficiency level is still
weak. Stock prices have not yet reflected information from businesses as well as
other market information (There are cases where corporate announcements are
highly effective but prices still go down or vice versa). The reason is that the
information disclosure process has not been done well. Information that has not
been disclosed in a timely manner is incomplete, lacks transparency and
honesty. There is still the phenomenon of “information leakage” leading to
“insider trading” and “insider trading” activities. This shows that stock prices
reflect “asymmetric information”. This is the reason why the investment process
in Securities (Vietnam) carries many risk factors and investors lack confidence
in the information announced by listed companies as well as other agencies. to
investment psychology according to sentiment, following the trend of "herd"
more and more.

When an information system is not clear and transparent, investors' forecasts

become meaningless, leading to them making inaccurate decisions, thereby
creating a virtual supply and demand in the market. and as a result, there may be
a situation of "stock bubble" with high risk of market bursting. Besides, it is
difficult to attract foreign investors to pour capital into the securities channel.
Because they cannot use their superior calculations and analysis to win when
asymmetric information occurs and is heavy.

b. Impact on the economy:

 The effect of the economy on the stock market can be seen by its impact on
the profitability of the business. When the economy is in a recession and
unemployment is high, corporate profits will decline. This decline will lead to a
drop in stock prices and, ultimately, a stock market crash. When the economy is
doing well, corporate profits will increase, leading to a sharp increase in stock
prices.

Investment is the most basic foundation for development. However, when

real assets and main assets are not properly valued due to inefficient market,
investors will not boldly buy, hesitate to invest, etc., and thus will not stimulate
growth economy. Besides, negative speculation will occur to manipulate the
market, causing instability to the economy.

On the other hand, inaccurate and incomplete information will lead to

inefficient allocation of resources, causing the risk of wasting resources in
places with poor governance and lack of resources for talented managers. The
economy gradually became sluggish and distorted. 

The lack of information causes manufacturers to provide too much of some

products and too little of others, not meeting the needs of consumers. On the
other hand, some consumers do not buy the product even though they benefit
from it, others buy the product at a loss.

2. Credit market: In credit activities, banks always have less information

about the project and the purpose of using the granted credit than customers.
 3.  Insurance market: Customers of insurance companies tend to be high-
risk people. Customers who have purchased insurance often reduce their caution
because they do not have to bear the entire cost of damage caused by them.

Question 2:

The difference of lemon problem influence between OTC market and Exchange
traded

Characteristic OTC market Exchange - Explain

s traded
 

Management An over-the- Unlike OTC, Through these

counter (OTC) trading on characteristics, it’s
market is a Exchange is under easy to see that the
decentralized the management of “lemon problem”
market in which the center. So on OTC occurs
market participants must seriously because
participants trade follow rules that the information on
stocks directly are set. OTC is not as much
between two Simultaneously, as on Exchange. 
parties and securities This leads to
without a central companies must consumers may not
exchange or also provide a be able to
broker. certain amount of thoroughly evaluate
Securities information the goods or
companies have according to the services they are
rights to control law. thinking about
their purchasing. Of
information. ,  course, the severity
They can hide of the "lemon
the bad problem" depends
information and on this.
show the
information that
they want. So,
investors will
find it hard to
grasp the
situation.
 Exchange is an
Formality status OTC is the absolute formal Exchange market is
decentralized and setting of trading trading done by
informal setting done by well- well-established
for trading which established and constantly
is usually used companies to keep monitored so it’s
by small constant harder to encounter
companies and supervision on the lemon problem than
businessmen. action. the OTC market
used by small
companies and
businessmen. 
Investment -The OTC - The exchanges Trading in the
risks market is likened market has only Exchange market
to a “black price at the same has a lower risk
market” because time to help create when encountering
the stock is not a safer, information
listed so the transparent, better asymmetry. On the
information is liquidity contrary, retail
not provided investment investors are
transparently and environment for vulnerable to
accurately. investors. shoveling of
shovels, meme
-Free brokers -The broker needs stocks, scams and
have more to verify the no compensations
information take identity and carry or the investors
advantage of the out the registration have risk of a bad
asymmetry and procedure to work. bargain.
the trust of
investor to profit By the way, the
from the mobilized capital of
difference  -KYC is required good businesses can
in the exchanges so be affected by the
- Businesses it easier for underestimate
which have non- businesses to compared to the
performing loan identify investors  reality value of
may take investors.
advantages of
stocks prices go
up and down
unstability to
create virtual
supply and
demand, blow
price to dirty
price and blow
capital

Conclusion: The effect of the lemon problem on the centrally regulated stock
market and the OTC market is different.

Question 3:
 This statement is wrong.

- The mortgage of an asset is of great value to each bank, this is like a

lucrative bait. Because the debtor runs away or pays the debt under
circumstances, it is more or less beneficial for the bank due to the large amount
of money deposited in advance. However, everything has its value, the bank still
believes as the debtors explain, the authorization contract, the transfer of the
right to use the property is just a formality, to secure the loan, not real sale or
transfer. However, after signing the agreement or authorization contract when
the loan repayment is not guaranteed, the risk of property loss is very high.
Aside from, there are some cases, for example: when the authorization contract
is signed, the debtor immediately sells this property and runs away. Although it
is not difficult to investigate, verify and accept these cases, because the other
transfer contracts are legally legal in form but very time-consuming. This is the
clearest evidence of information asymmetry, one party holds a lot of
information (debtor) and the other has little information (bank).

- Besides, valuable papers such as savings books, securities, bonds... have

high security, liquidity as well as great value. However, there are still many
types of risks when getting a mortgage with these papers. That is:

+ Risk of falsifying data and documents

The risks from Mortgaging with valuable papers are mainly in the form of
falsifying data and falsifying documents. For example, a bank employee forged
a passbook from another bank and then used this book to take out a mortgage,
appropriating money to go to business, but suffered a loss of billions of dong.

+ Risk of devaluation

Price difference (for example, savings books used to borrow gold), when the
price of gold rises too quickly beyond the limit of the savings book, customers
are not able to buy gold back and lead to pay out of date

+ Risks of documents related to ownership of goods

 Common risks related to documents such as bills of exchange, sets of
documents of origin of shipments (import/export documents)...

- In fact, not asset mortgaged at the Bank can also be handled with the right
regulations. There are many cases, example for: when the Bank accepts the
mortgage, has registered the secured transaction, The debtor named on the Asset
Using Right Certificate agrees to hand over the property to the Bank for
handling the sale. But the Bank still cannot handle it because the property is
related to a criminal case or to some third-party civil case and is therefore going
from a secured loan to an unsecured loan.