Factors of Share Price Volatility: Empirical Evidence from Private Commercial Banks in Bangladesh

The objective of this study is to investigate the fundamental factors of share price volatility in Bangladesh specially the private commercial banks listed in the Dhaka Stock Exchange (DSE) Ltd. The price of shares in DSE is so volatile that it swings more frequently that’s why investors become puzzled while making an investment decision. Thus, this study tries to investigate the association of share price with some fundamental factors like earnings per share, dividends per share, assets growth, bank size and two new variables namely capital to risk-weighted assets ratio and non-performing loan to total loans. Share prices of 18 commercial banks listed in DSE from 2014 to 2018 totaling 90 observations have been considered for analysis. This study applied panel data set in regression model using Fixed-Effects with Driscoll and Kraay’s Standard Errors to test the hypothesis by STATA 13 software. The empirical result of the study presents that earnings per share, dividends per share, bank size and non-performing loan to total loans significantly affect the market price of shares. This study will extend the literature on factors of share prices in an emerging economy like Bangladesh. Furthermore, this study could be extended further by considering all listed firms of DSE which will give us more insight into share price volatility in Bangladesh. Keywords: Share price volatility, Commercial banks, Investment decision, DSE, Bangladesh DOI: 10.7176/RJFA/11-4-12 Publication date: February 29th 202

Investigating Fisher Effect in Bangladesh and Its Elements in the Dhaka Stock Exchange

This study aims to address the existence of Fisher Effect on the Stock Exchanges. Empirically, investors in Bangladesh has faced striding up and downs on the Capital Market, much of it can be attributed to the players’ lack of competencies in technical and fundamental analysis. While various macroeconomic forces are simultaneously at work, from the major indicators, this paper selectively argues the position of the Fisher Elements in the Dhaka Stock Exchange (DSE). Results show that Real Interest Rate impacts negatively, while Inflation Rate and Nominal Interest Rate has positive effects; the latter’s impact is much more profound. In-depth analysis exhibits the absence of Fisher Effect, presence of Price Puzzle and the offsetting effects of Inflation and its role in stimulating the economy in the country using Targeting Inflation. Whereas, Real Interest Rates tend to make savings much more lucrative for the middle-class dominated population that leads to crowding out of investments in the DSE. Finally, apparent failure of the policy makers to boost the Market Index by cutting the Nominal Interest Rate has also become evident. Keywords: Price Puzzle, Target Inflation, Fisher Effect, Dhaka Stock Exchange (DSE) General Index Poin

The Determinants of Stock Market Development: A Study on Dhaka Stock Exchange Limited (DSE)

The study investigates the determinants of stock market development in Bangladesh. Both primary and secondary sources of data have used to investigate the relationship between Stock Market Size, Liquidity, Volatility, Asset Pricing, Regulatory and Institutional Indicators and stock market development. The reliability of the variables was analyzed by Cronbach’s alpha. The correlation between the independent variables and dependent variables was measured with the Pearson’s Correlation and Spearman’s Correlation test. All the hypotheses formulated in this study under the conceptual framework have been accepted through conducting Spearman’s and Pearson’s Correlation Analysis as all the independent variables has significant positive correlation with the stock market development. The regression result indicates that all the dimensions of financial determinants combined significantly influence the stock market development. However, the stock market size and liquidity has significant positive relationship with the stock market development. In order to promote stock market development in Bangladesh, it is important to improve stock market liquidity by reducing demand supply gap of prospective share, to develop financial intermediaries and crating awareness among investors. Keywords: Determinants, Stock Market development, Dhaka Stock Exchange limited JEL Classification: C21, C830, G

VOLATILITY NEXUS BETWEEN STOCK MARKET AND MACROECONOMIC VARIABLES IN BANGLADESH: AN EXTENDED GARCH APPROACH

This paper examines the volatility of the Bangladesh stock market returns in response to the volatility of the macroeconomic variables employing monthly data of general index of Dhaka Stock Exchange (DSE) and four macroeconomic variables (Call Money Rate, Crude Oil Price, Exchange Rate and SENSEX of Bombay Stock Exchange) from January 2001 to December 2015. The results of GARCH-S models reveal that the volatility of DSE return is significantly guided by the volatility of macroeconomic variables, such as, exchange rate and SENSEX. Specifically, volatility of the DSE is expected to 19% increase by 1% increase of exchange rate. Moreover, the volatility of the Bangladesh stock market returns is expected to dampen down by 2% with an increase in the volatility of Indian stock market of 1%. Thus, we can comment that adding exchange rate or stock returns of India in the GARCH model provides significant knowledge about the behavior of the DSE volatility.JEL Codes - C32, C58, G10, G1

Stock Prices and Microeconomic Variables: T-Y Granger Causal Evidence From Dhaka Stock Exchange (DSE)

This study examines the long-run equilibrium relationship and the direction of causality between stock prices at Dhaka Stock Exchange (DSE) and a set of four stock market oriented factors technically can be defined as microeconomic variables. Through utilizing the methods of Unit Root tests, Johansen and Juselius (1990) Cointegration test and the long run Granger Causality test proposed by Toda and Yamamoto (1995), we have investigated the long-run equilibrium relationship as well as causal relationships between the DSE all share price index (DSI) and the four microeconomic variables (i.e. market dividend yield, market price-earnings multiples, monthly average market capitalization and monthly average trading volume) using monthly data from the period January 2000 to December 2010. Significant findings include long-run equilibrium relationship among the variables under study. However, DSI, in any way, do not granger cause dividend yield; but DSI has bi-directional causal relation with market price-earning multiples and the first lag of the monthly average trading volume. On the other hand, unidirectional causality is found from DSI to the first lag of monthly average market capitalization but no causality is found from the opposite direction. Keywords: Microeconomic Variables, Unit Root Test, Cointegration, T-Y Granger Causalit

Impact of Monetary Policy on Post Crashed StockMarket Performance: Evidence from Dhaka Stock Exchange

Volume 4 No. 1, Jan-June 201

Efficiency and Volatility of the Stock Market in Bangladesh: A Macroeconometric Analysis

Abstract. This study investigates the weak form efficiency of Efficient Market Hypothesis (EMH) employing Autocorrelation test, Runs test and Unit Root tests,  and the  nature  of  volatility characteristics of stock returns applying GARCH family models in Bangladesh  stock market using  daily all share price index return  data  of Dhaka Stock Exchange (DSE) from 02 January 1993 to 27 January 2013. This studyalso examines  the semi-strong form  of  the  EMH of DSE based  on  macroeconomic  variable  version  of  the  Arbitrage Pricing Theory (APT) applying Cointegration tests, Vector Error Correction Model (VECM) and Granger causality tests,  and  the volatility of the DSE returns in response  to  the  volatility of the  macroeconomic variables employing GARCH family models using monthly data from January 2001 to December 2012.In addition, the short run and long run relationships between macroeconomic variables and aggregate stock prices in Bangladesh have also been determined. Employing both nonparametric tests (Runs test and Phillips-Perron test) and parametric tests (Autocorrelation test and Augmented Dickey-fuller test), this study finds that the DSE of Bangladesh is not weak form efficient. Taking the outcome of VAR models into account, it is found that all selected macroeconomic variables do significantly explain the stock prices of the Bangladesh stock market. As a consequence, it may be concluded that the Bangladesh stock market is not efficient in the semi-strong form of EMH. Results of the estimated MA(1)-GARCH(1,1) and MA(1)-EGARCH(1,1) models reveal that stock market returns of Bangladesh exhibit leptokurtosis, volatility clustering and leverage effect. Results of six GARCH-S models indicate that thevolatility of DSE return is significantly influenced by the volatility of macroeconomic variables, such as, exchange rate, broad money supplyandstock returns of India.Keywords. Efficient market hypothesis, Stock prices, Vector error correction model, GARCH family models, Volatility.JEL. C58, E44, F36, G10, G14

LARGE-SCALE IFRS IMPLEMENTATION AND BANK PERFORMANCE: AN EMERGING ECONOMY PERSPECTIVE

International Financial Reporting Standards (IFRS) are largely contributing to accounting quality improvement around the world. Since its first mandate in European countries, over 100 countries are now complying with the IFRS in their financial reporting practices. To date, plenty of research initiatives have been undertaken to examine the diverse impacts of IFRS from different perspectives. However, there remains a paucity in examining the changes in firm performance resulting from IFRS adoption, especially in the banking sector. Therefore, this study aims to evaluate the impact of IFRS adoption on financial performances of commercial banks. Compiling panel data of 13 commercial banks listed in Dhaka Stock Exchange, an Ordinary Least Square (OLS) estimate has been administered. The empirical result of the study shows a strong relationship between the large-scale IFRS implementation and commercial banks’ financial performance. The findings of the study contribute to the IFRS literature by exposing the relationship between large scale IFRS implementation and bank performance from an emerging economy perspective. The study also recommends required country-specific strategic considerations in adopting and implementing IFRSs

LARGE-SCALE IFRS IMPLEMENTATION AND BANK PERFORMANCE: AN EMERGING ECONOMY PERSPECTIVE

International Financial Reporting Standards (IFRS) are largely contributing to accounting quality improvement around the world. Since its first mandate in European countries, over 100 countries are now complying with the IFRS in their financial reporting practices. To date, plenty of research initiatives have been undertaken to examine the diverse impacts of IFRS from different perspectives. However, there remains a paucity in examining the changes in firm performance resulting from IFRS adoption, especially in the banking sector. Therefore, this study aims to evaluate the impact of IFRS adoption on financial performances of commercial banks. Compiling panel data of 13 commercial banks listed in Dhaka Stock Exchange, an Ordinary Least Square (OLS) estimate has been administered. The empirical result of the study shows a strong relationship between the large-scale IFRS implementation and commercial banks’ financial performance. The findings of the study contribute to the IFRS literature by exposing the relationship between large scale IFRS implementation and bank performance from an emerging economy perspective. The study also recommends required country-specific strategic considerations in adopting and implementing IFRSs

Risk-Return Trade-off in Emerging Markets: Evidence from Dhaka Stock Exchange Bangladesh

This paper attempts to measure the risk and return relationship in Dhaka Stock Exchange (DSE). The study reports a statistically significant positive relationship between risk and return both at the individual security level and at the portfolio level, confirming the theoretical predictions and empirical findings on this issue in developed markets. Although portfolio risk and returns are found to be significantly positively related in general, some inconsistencies were revealed in the context of relative risk for high risk portfolios, suggesting the existence of some anomalies or mispricing in high risk assets. These findings have important implications for investment decisions at the DSE in that the investors may be able to create profitable investment strategies using the mispricing information