Factors behind the success and sustainability of Dhaka Stock Exchange

An investigation into macroeconomic variables and investor perceptions that affect the share prices on the Dhaka Stock Exchange

Term paper Research Methodology

Submitted to:
Dr. Syed Ferhat Anwar Professor, IBA. DU Course Coordinator

Submitted by:

Group 1
Omaer Ahmad ZR 09 Kawsar Ahmad ZR 50 Rafaat Waasik Ahmed ZR 53 Nasimul Haque ZR 54 Rashed Al Ahmad Tarique ZR 61

Abstract
Over the last 5 years or so, the Dhaka Stock Exchange has consistently outpaced the bourses of our neighboring countries and most of the major international exchanges in terms of return on investment. This paper attempts to identify the relationships between major macroeconomic factors such as GDP growth, inflation rate, remittances, festivals and micro factors such as investors perception of risk and return on investments in the DSE relative to other investment opportunities to the DSE General Index. In order to identify the relationships statistical tools regression, paired t-tests, correlation, and ARIMA model have been used. ARIMA is used for finding relationship between Pohela Boishakh and Eid. The stock index is positively correlated with remittance inflow, however, inflation is negatively correlated. The paper also finds that prime reason that investors invest in DSE is that they find it enjoying, followed closely by its high return on investment. In addition, the research finds that investors only relate return from DSE mildly with return from Real estate. The relationship between Real Estate risk and DSE risk is also observed to be negatively correlated. There is no significant link between Pohela Boishakh as an event and DSE Index. In addition, the paper includes analysis of individual sectors on the stock market and how their stock prices are affected by occurrence of these factors. We used CAR( Cumulative Abnormal Return) method to find the variations. The pharmaceuticals stocks were most averse to fluctuations whereas the banking and insurance industries were the least resilient.

Contents
Factors behind the success and sustainability of Dhaka Stock Exchange ....................... 1 Abstract ........................................................................................................................... 2 Introduction ..................................................................................................................... 4 Research objectives ........................................................................................................ 5 Literature review.............................................................................................................. 6 Pre-Qualitative Hypotheses ............................................................................................. 7 Macroeconomic Factor Hypotheses ............................................................................. 7 Primary Qualitative Study ................................................................................................ 8 Post Qualitative hypotheses ............................................................................................ 8 Working definitions ...................................................................................................... 9 Methodology.................................................................................................................. 10 Findings and analysis .................................................................................................... 13 T-test ......................................................................................................................... 14 Frequency Tables and Charts ....................................................................................... 16 Conclusion .................................................................................................................... 24 Annex 1: Questionnaire for investors ............................................................................. 25 Annex 2: List of References .......................................................................................... 28

Introduction
The stock market in Bangladesh, more specifically the Dhaka Stock Exchange (DSE), has seen a meteoric rise over the last few years. In fact, the DSE General Index has risen by more than 125% from March 2009 to February 2010. The following figure provides a comparison of the DSE Index with some major regional and international markets.

Figure 1: DSE vs. other regional and global indices

As observable from the table, the DSE Index sustained the greatest increase over the period starting from 2003 to February 2009. Another important observation to be made from the graph is that the index suffered a significantly milder shock from the global economic recession. Currently, there are 448 listed companies on the DSE that have a market capitalization of around Tk. 2,528,317 million. Contrasting this figure with the 267 companies listed in 2003 and a more than tenfold increase in market capitalization, we can truly gauge the progresses in leaps and bounds of the securities market in Bangladesh. Recently, the DSE achieved a daily turnover of Tk. 23,057 million. The number of BO Accounts is approaching 10 million. Therefore, the question that begs to be asked is what factors contribute to the success of this market.

Figure 2: Important Credit growth statistics, Bangladesh vs. neighbors

Figure 3: Market Turnover Trend, DSE 2003-2010

Despite its remarkable success, market capital is only about 19% of the GDP, which means a massive potential exists for further listing of firms on the bourse. Therefore, investigations into the factors that are in fact affecting the DSE, positively or negatively, need to be performed to ensure the long-term sustainability of this fledgling sector. In our paper we will be diving into the major macro and micro factors that are relevant to the success and sustainability of the capital market.

Research objectives
The broad objective of our research involves answering the question posed above, i.e. uncovering the factors that are involved in the success and sustainability of DSE. In fulfilling our objectives, we must scour through the macroeconomic, microeconomic and psychographic perceptions of investors. In the first stage, we performed a literature survey and review that allows us to identify some factors that could give us an answer to our question.

Literature review
Calendar effect such as holiday and festival affect the stock price. From the study of 17 Muslims countries stock market, Jedrzej Bialkowski, Ahmad Etebari, Tomasz Piotr Wisniewski inferred that returns during Ramadan are almost nine times higher and less volatile than during the rest of the year. No discernible difference in trading volume is recorded. They also found that these results consistent with a notion that Ramadan positively affects investor psychology, as it promotes feelings of solidarity and social identity among Muslims world-wide, leading to optimistic beliefs that extend to investment decisions. <Piety and Profits: Stock Market Anomaly during the Muslim Holy Month> Investors dont take the rational decision always, sometimes emotional factor play the role in stock price. Kathy Yuan, Lu Zheng, Qiaoqiao Zhu, after studying the stock of 48 countries, found that stock returns are lower on days around a full moon than on days around a new moon. The magnitude of the return difference is 5.4 percent per annum based on our 15-day window analysis of the global portfolio. The return difference is not due to changes in stock market volatility. . <Are Investors Moonstruck? Lunar Phases and Stock Returns> The returns of Dhaka Stock Exchange do not follow a random walk model and the significant auto-correlation co-efficient at different lags have found supporting the hypothesis of weak-form efficiency. Assam Mubarak and Professor Kevin Kasey proved from their research based on 1988-1997 that Dhaka Stock Market is weak-form efficient. The results are consistent in different sub-sample observations, without outlier and for individual securities<Weak-form market efficiency of an emerging Market: Evidence from Dhaka Stock Market of Bangladesh> The imposition of the lock-in period has contributed to the price discovery mechanism by reverting an overall negative risk-return time-varying relationship into a positive onesided A. Basher, M. Kabir Hassan, and Anisul M. Islam proved that lock-in did not have any overall impact on stock volatility; the imposition of a circuit breaker has contributed significantly to the volatility of realized returns. <Time-Varying Volatility and Equity Returns in Bangladesh Stock Market> High volatility, unaccompanied by any change in the real situation, may lead to a general erosion of investors confidence in the market and redirect the flow of capital away from

the stock market. Habibur Rahman, Sakhawat Hossain inferred that there exists important link between stock market uncertainty and public confidence in the financial market. The report also suggests that the findings are also applicable for our stock market. <Volatility of Stock Return in the Dhaka Stock Exchange> A significant relationship between conditional volatility and the stock returns, but the riskreturn parameter is negative and statistically significant. While this result is not consistent with the portfolio theory, it is possible theoretically in emerging markets as investors may not demand higher risk premium if they are better able to bear risk at times of particular volatility. M. Kabir Hassan, Anisul M. Islam, Side Abu Basher concludes that While circuit breaker overall did not have any impact on stock volatility, the imposition of the lock-in period has contributed to the price discovery mechanism by reverting an overall negative risk-return time-varying relationship into a positive one. <Market Efficiency, Time-Varying Volatility and Equity Returns in Bangladesh Stock Market>

Pre-Qualitative Hypotheses
Using scoping, we concentrate on the following macroeconomic factors and investor perception (to be outlined in the post-qualitative hypothesis segment). The policy implications on price stability have been subject to many different studies and hence we can consider those to be law-like generalizations.

Macroeconomic Factor Hypotheses

GDP growth is positively correlated with DSE general index Inflation is positively correlated with DSE general index Remittance is positively correlated with DSE general index Ekushe Boi Mela influences DSE general index Pohela Boishakh influences DSE general index Eid influences DSE general index Durga Puja influences DSE general index

Primary Qualitative Study

After the formation of the pre-quali hypotheses from our secondary qualitative research, we went to Dhaka Stock Exchange to perform our primary qualitative research. We selected the Key Informant Interview (KII) method for this since only it would provide us with the necessary information required to formulate our post qualitative hypotheses. For our interview we selected five investors and three stock brokers as our subject. We selected them on the basis of their extensive experience about Dhaka Stock Exchange. We asked them about Their perceptions about the possibility of a crisis in DSE in the near future and how the current scenario is different from the stock market crash of 1996. Effects of macro-economic variables such as festivals, political stability, inflation, natural disaster etc. on DSE performance. Risks and returns of Dhaka Stock Exchange compared to other investment opportunities such as, real estate and Bank Fixed Deposit. Number of investors involved in DSE and their knowledge about the stock market.

Although our interviewees agreed with all of the hypotheses mentioned above, they also suggested some additional factors behind the recent success of DSE. These factors are used to formulate our post-qualitative hypotheses about investors which are shown in the valid hypothesis section below.

Post Qualitative hypotheses

In addition to the above pre-quali hypotheses, we derive the following post-qualitative hypotheses regarding investors, their perception and habit. Investor Perception Hypotheses Investors perceive that investing in DSE will yield higher return than Bank FD Account. Investors perceive that investing in DSE will yield higher return than Real Estate. Investors perceive that investing in DSE is more risky than Real Estate. Investors invest in DSE because of personal enjoyment. Investors invest in DSE for high return on investment. Investors invest in DSE because of habit. Investors invest in DSE they like to gamble.

Working definitions
Inflation: Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services; consequently, annual inflation is also erosion in the purchasing power of money a loss of real value in the internal medium of exchange and unit of account in the economy. In Bangladesh we use the price level of 1996 as a base year and calculate the inflation on the basis of change in price from that year. Ekushey Boi Mela: The duration of Ekushey Boi Mela is one month starting from 1st February to 28th February. We will use the 90 days window that means we will observe the change of stock price from the 1st January to 31st March. Pohela Boishakh: Pohela Boishakh, the first day of the Bengali year, brings the whole nation to a festive mood. We want to see whether this festiveness affects the stock price. As it occurs on 14th April, we will observe the stock price starting from 14th March to 14th May. Eid: Being the Muslim populated (85% of total population) country, Eid-ul-Fitr and Eid-ulAzha are the biggest festival in our country. We want to see where this festive mood affects the stock price. Here we will use the 60 days window.

Methodology
Part of our objective in this research is to identify the emotional and rational aspects in the investing decision of DSE investors. Investing decision influenced by emotional factors is reflected in situations marked by rising stock prices during festivals. We plan to examine the how stock prices of selected industry responds to these events. 21 e Boi Mela, Pohela Boishakh, Eid, Ramadan, and Durga Puja are the events we will be considering as festivals. Rational investing decision is reflected in situations where stock prices respond to events like annual budget announcement. Unlike festivals, investors make rational investment decisions in such events. Such effects are similar to interventions in time series data. We intend to measure this effect in two phases. In the first phase we measure this effect using Cumulative Abnormal Return of industry average stock prices within 15 to 90 days window of the event. Industry averages are calculated by taking simple average of all the stocks under the scope within that industry. For missing values in the time series we take the stock price of the previous day. Our scoping consists of selecting relatively large industries (i.e. Bank, Financial Institution, Insurance, Food & Allied, Fuel & Power, Pharmaceuticals, and Textiles) and, within these industries; companies with regular trading record and that are listed at least prior to 2006. In the latter phase we plan to examine using Auto-Regressive Integrated Moving Average (ARIMA) models whether interventions like such events has any impact on stock prices. ARIMA models are widely used in the analysis of time series data and measure effects of interventions in the time series. ARIMA models are also called Box-Jenkins models. ARIMA models predict a variable's present values from its past values. The order of an ARIMA (autoregressive integrated moving-average) model is usually denoted by the notation ARIMA (p,d,q ), where

p - is the order of the autoregressive part d - is the order of the differencing q - is the order of the moving-average process If no differencing is done (d = 0), the models are usually referred to as ARMA(p, q) models. Mathematically the pure ARIMA model is written as where t = indexes time = is the response series or a difference of the response series = is the mean term = is the backshift operator; that is, = is the autoregressive operator, represented as a polynomial in the backshift operator: is the moving-average operator, represented as a polynomial in the backshift operator: is the independent disturbance, also called the random error ARIMA modeling involves three stages: (1) Identification of the initial p, d, and q parameters, using autocorrelation and partial autocorrelation methods; (2) Estimation of the p (auto-regressive) and q (moving average) components to see if they contribute significantly to the model or if one or the other should be dropped; and (3) Diagnosis of the residuals to see if they are random and normally distributed, indicating a good model. Identification of ARIMA parameters: In this step we need to estimate the best-fit parameter for the Autoregressive component (p), Integrated component (d), and Moving average component (q). The values of the p and q parameters may be inferred by looking at autocorrelation and partial autocorrelation functions as discussed below. Autocorrelation and partial autocorrelation functions (ACF and PACF) can also be used to estimate p and q. Specifically, ACF and PACF plots plot deviations from zero autocorrelation by time period: the larger the positive or negative autocorrelation for a period, the longer the plot line to the right (positive) or left (negative) of zero.

Autoregressive models. AR models are indicated when PACF cuts off sharply at lag x but ACF declines slowly. To determine tentatively the value of p, look at the PACF plot and determine the highest lag at which the PACF is significant. Moving average models. MA models are indicated by a rapidly declining ACF and PACF. If the ACF does not decline slowly but rather cuts off sharply at lag x, this is suggests setting q=x, thereby adding a moving average component. If autocorrelation is negative at lag-1 then this also indicates the need for an MA (q) term higher than 0. In SAS, the IDENTIFY statement produces a set of plots namely ACF, IACF, PACF followed by a White Noise test. White Noise is an approximate statistical test of the hypothesis that none of the autocorrelations of the series up to a given lag are significantly different from 0. If this is true for all lags, then there is no information in the series to model, and no ARIMA model is needed for the series. Estimation and Diagnostic Checking Stage Estimation and Diagnostic of the model is done by using ESTIMATE statement in SAS. ESTIMATE function outputs, among others, "Conditional Least Squares Estimation," which indicates the estimation method used, a table of goodness-of-fit statistics which aid in comparing this model to other models, and a table of correlations of the parameter estimates which help in assessing the extent to which collinearity might have influenced the results. In our research we used a simple ARIMA(1,1) model to see whether these interventions increased the predicting accuracy of the model by using a dummy input variable representing the intervention. If the prediction accuracy increases it can be inferred that the new model is a better fit of the time series data, thus representing a good relation. In addition to identification of the emotional and rational investing decision of DSE investors, we plan to examine the impact of remittance and inflation on the performance DSE general index and selected industry averages.

In order to gain the perception of the demand side, the investors, we have done an online survey. The sample method used was non-probabilistic, convenient sampling. We used non-probabilistic sampling because our survey output will be used to identify

factors and not for predicting future outcomes. We prepared a survey form using the popular GoogleDocs and then posted the link on Facebook and Yahoo Groups pages which gives platforms to the investors of Dhaka Stock Exchange. When an investor fills up the questionnaire, GoogleDocs saves all the data in a spreadsheet and gives us updated information in real time. A sample of the questionnaire is given in the annexure. We began our survey by giving the respondents a confidentiality agreement and the reason for this survey. Then we screened the investors of DSE by asking a dichotomous question about their investment in the DSE. For all the three questions in part two, we have used linear regression as the appropriate analysis technique. We used this to understand the reasons for which people invest in stock exchange. The options given were: enjoyment, high return on investment, gambling and habit. Also a blank field was provided to give any alternate reasons for their investment decision in DSE. In the third part we requested the respondents to rate the yield of investment from DSE, Bank FD Account and Real Estate. The rating was done in a six point Likert scale with very high return and very low return at the two extremities. Then we compared the risks involved from investing in DSE and real estate. Here also six point Likert scales were used. For the analysis part, we did linear regression on the second part of the questionnaire and for the rest we used paired t-test. The detailed results from analysis of the questionnaire responses are given in the Findings and Analysis section.

Findings and analysis

A mentioned earlier two types of analysis techniques were used on the data gathered from questionnaire. For the different reasons why an investor usually invests in the stock exchange (Question-02), cross tab was done. And for the ratings of risks and returns of DSE, real estate and Bank Fixed Deposit, paired t-test was done. A total of 52 people responded to our survey and based on the information they provided us the results are the following:

T-test
From part three and part four of the questionnaire three pairs were made to performs ttest. They are return from bank vs. return of DSE, return from real estate vs. return of DSE, and risk of real estate vs. risk of DSE. In the table Paired Samples Statistics, separate summary statistics (mean, N, standard deviation and standard error) are given for the three pairs.

Paired Samples Statistics Mean Pair 1 Pair 2 Pair 3 Return from bank FD DSE Real Estate DSE Real Estate Risk DSE Risk 2.30 4.64 4.38 4.64 2.75 4.77 N 53 53 53 53 53 53 Std. Deviation 1.475 1.442 1.632 1.442 1.568 1.325 Std. Error Mean .203 .198 .224 .198 .215 .182

As we can see that people generally perceive investment in the stock exchange to yield much higher, almost double, return than bank fixed deposits. In case of return from DSE this is not the same case. People expect similar returns from both of the investments, but they perceive a much lower risk associated with real estate.
Paired Samples Correlations N Pair 1 Pair 2 Pair 3 Return from bank FD & DSE Real Estate & DSE Real Estate Risk & DSE Risk 53 53 53 Correlation .052 -.105 -.222 Sig. .712 .455 .111

The correlation value in the table Paired Samples Correlations indicates the strength of the variables relations. In this table also we see that the effect of bank FD and real estate have quite opposite effects. Peoples perception about bank FD and DSE are positively correlated while the reverse happens on case of both risk and returns of DSE and real estate.

From the above tables containing SPSS output from paired t-tests, we can clearly see that people perceive the Return of DSE to be almost double of Bank FD. They also perceive the risk from DSE to be twice that of Bank FD. In case of Returns of DSE versus Returns from Real Estate, they perceive the risk to be much higher in DSE compared to Real Estate and hence also expect a higher return from DSE compared to Real Estate. Therefore, all our hypotheses regarding investors perceptions about risk and return are proven. Bivariate correlation table of Enjoyment, Return on Investment, Habit and Gambling as reasons behind investment on the Dhaka Stock Exchange Enjoyment ROI Correlation Coefficient Enjoyment Sig. (2-tailed) N Correlation Return Investment Spearman' s rho Habit on Coefficient Sig. (2-tailed) N Correlation Coefficient Sig. (2-tailed) N Correlation Coefficient Gambling Sig. (2-tailed) N 1 . 53 .304* 0.027 53 .281* 0.042 53 0.168 0.228 53 .304* 0.027 53 1 . 53 0.038 0.788 53 0.109 0.436 53 Habit .281* 0.042 53 0.038 0.788 53 1 . 53 .314* 0.022 53 Gambling 0.168 0.228 53 0.109 0.436 53 .314* 0.022 53 1 . 53

*. Correlation is significant at the 0.05 level (2-tailed). We have used the Spearman correlation as our sample is non-parametric. From the table above, there appears to be significant correlation between the factors of

enjoyment, return on investment, habit and gambling. This allows us to validate our hypothesis regarding the influences which play a part in luring investors to DSE.

Frequency Tables and Charts

Enjoyment Cumulative Frequency Valid strongly disagree disagree somewhat disagree somewhat agree Agree Highly agree Total 7 2 5 7 5 27 53 Percent 13.2 3.8 9.4 13.2 9.4 50.9 100.0 Valid Percent 13.2 3.8 9.4 13.2 9.4 50.9 100.0 Percent 13.2 17.0 26.4 39.6 49.1 100.0

Return on Investment Cumulative Frequency Valid disagree somewhat disagree somewhat agree Agree Highly agree Total 4 7 11 13 18 53 Percent 7.5 13.2 20.8 24.5 34.0 100.0 Valid Percent 7.5 13.2 20.8 24.5 34.0 100.0 Percent 7.5 20.8 41.5 66.0 100.0

Habit Cumulative Frequency Valid strongly disagree disagree somewhat disagree somewhat agree Highly agree Total 16 9 8 9 11 53 Percent 30.2 17.0 15.1 17.0 20.8 100.0 Valid Percent 30.2 17.0 15.1 17.0 20.8 100.0 Percent 30.2 47.2 62.3 79.2 100.0

Gambling Cumulative Frequency Valid strongly disagree disagree somewhat disagree somewhat agree Agree Highly agree Total 14 5 5 11 10 8 53 Percent 26.4 9.4 9.4 20.8 18.9 15.1 100.0 Valid Percent 26.4 9.4 9.4 20.8 18.9 15.1 100.0 Percent 26.4 35.8 45.3 66.0 84.9 100.0

From the above frequency tables, it is observed that investors rate enjoyment in investing with the Dhaka Stock Exchange as the greatest influence on them investing on the DSE followed closely by the higher Return on Investment compared to other investment alternatives. This further validates our hypotheses regarding the factors that influence investment decisions in the DSE. Regression of remittance data with the DSE General Index from April 2008 and May 2010 gives us the following regression line:

Coefficients Model Unstandardized Coefficients B 1 (Constant) Remittance CPI 7758.258 .057 -36.017 Std. Error

Standardized Coefficients Beta t .544 .297 -.228 .894 -.687 Sig. .593 .384 .502

14259.126 .063 52.461

a. Dependent Variable: DSEMonthly

Correlations DSEMonthly DSEMonthly Pearson Correlation Sig. (2-tailed) N Remittance Pearson Correlation Sig. (2-tailed) N *. Correlation is significant at the 0.05 level (2-tailed). 22 .494
*

Remittance .494* .019 22 1

.019 22 22

There exists a significant correlation between monthly remittance inflows and DSE General Index. The following regression line shows the relationship between DSE General Index and CPI:

The regression line shows an inverse relationship between inflation and the DSE General Index over the period from April 2010 to May 2008.

Correlations DSEMonthly DSEMonthly Pearson Correlation Sig. (2-tailed) N CPI Pearson Correlation Sig. (2-tailed) N *. Correlation is significant at the 0.05 level (2-tailed). 22 -.458
*

CPI -.458
*

.042 20 1

.042 20 20

From the correlation table we observe that the DSE month-end index values are inversely correlated with the CPI (Consumer Price Index). Therefore, the hypothesis regarding a positive correlation between DSE Index and Inflation is disproved.

Correlations GDPGROWTH DSEYearEnd DSEYearEnd Pearson Correlation Sig. (2-tailed) N GDPGROWTHRATE Pearson Correlation Sig. (2-tailed) N 6 -.169 .749 6 6 1 RATE -.169 .749 6 1

The correlation table above shows an inverse correlation between the yearend DSE Index and GDP Growth rate. However there is not a strong correlation. A possible explanation for this might be that too little information was taken to actually get the real

correlation effect. So the hypothesis regarding relation between DSE Index and GDP Growth rate is disproved. The following table uses the cumulative abnormal return (CAR) method to find the changes that are experienced by sectors as a result of festivals and events popular in Bangladesh. This is calculated by the difference between the average returns of the sector in comparison with the average return of the stock exchange over a given period of time. The times are specified for each event in the working definitions section. The data is calculated from 2006 to 2009.

EVENTS Boi mela Boi mela Boi mela Boi mela Pohela pre Pohela pre Pohela pre Pohela pre Pohela post Pohela post Pohela post Pohela post Pre eid roja Pre eid roja Pre eid roja Pre eid roja Post eid roja Post eid roja Post eid roja Post eid roja Puja Puja

YEAR

DSE Gen

INSURANCE FOOD 0.152374 0.038248 0.29104 0.08897 0.165982 0.082066 0.273986 0.033468

PHARMA

BANK

2006 -0.16859 2007 -0.06025 2008 0.001274 2009 0.052119 2006 2007 2008 2009 -0.00519 -0.02051 -0.01156 0.00896

-0.0823 -0.17886 0.017092 -0.07706 0.020714 0.004707 0.012153 -0.17835 -0.04495 -0.11466 0.061495 -0.04335 -0.03304 -0.13155 0.022966 -0.0197 0.029024 0.018075 0.135259 0.045298 -0.18075 -0.10222 -0.13929 -0.34508 -0.36062 -0.36827 -0.17673 -0.12566 -0.27896 -0.09397 -0.05407 -0.17551

-0.04231 -0.10908 -0.02051 -0.08358 0.226153 0.030724 -0.19748 0.116264 -0.01894 -0.08858 -0.12961 -0.00848 -0.01111 -0.06852 0.017854 -0.17394 -0.01003 -0.04866 -0.00268 -0.11716 0.083309 0.000304 0.038559 0.291543

2006 0.034059 2007 0.0788 2008 -0.00264 2009 -0.02108 2006 -0.03384 2007 0.084911 2008 0.016355 2009 -0.17394 2006 0.037409 2007 0.036364 2008 -0.10655 2009 0.046555 2006 2007 -0.03679 -0.00079

-0.12363 -0.15062 0.324516 -0.08776 0.094815 0.092389 -0.08419 -0.05339 0.074951

-0.0655 -0.08849 -0.01398 0.043369 0.134479 -0.04673 0.078978 0.010517 -0.51392 0.028279

Puja Puja Pre eid kurb Pre eid kurb Pre eid kurb Pre eid kurb Post eid kurb Post eid kurb Post eid kurb Post eid kurb

2008 -0.07613 2009 0.133571 2006 -0.03003 2007 0.028923 2008 0.090793 2009 0.072161 2007 2008 2009 0.11221 -0.02662 -0.03768

0.017143 0.146644 0.065976 -0.232 -0.03003 -0.08833 -0.21406 0.125582

0.233822 -0.11564 -0.11606 0.051128

-0.05592 -0.04113 -0.11999

-0.09069 0.00501 -0.08395 -0.09031 -0.21087 0.080134 -0.0754 0.046415 -0.03571 0.085306 -0.04338 -0.14719 -0.06347 -0.02901

-0.03778 0.056158 0.163842 0.141872 0.233487 -0.20179

2009 0.061411

From the table, it is observed that there is not a significant impact of the events and festivals on the DSE Index overall. However, different industries are seen to react differently to different events. As observed from the data, the insurance and banking industries appear to be most reactive to these events. On the other hand, the pharmaceuticals industry appears to be the most stable to the changes in local festivities and events.

Conclusion
The paper took inspiration from a number of interesting and thought-provoking writings of experts around the world and attempted to indentify the alignment of international trends in our local context. It used statistical techniques such as paired t-tests, Pearson and Spearman correlations, simple linear regressions and ARIMA predictive models. We also observed how national festivals and events affect the share prices of some industry stocks. We used CAR ( Cumulative Abnormal Return) method to find the variations. The pharmaceuticals stocks were most averse to fluctuations whereas the banking and insurance industries were the least resilient. The paper also finds that prime reason that investors invest in DSE is that they find it enjoying, followed closely by its high return on investment. In addition, the research finds that investors only relate return from DSE mildly with return from Real estate. The relationship between Real Estate risk and DSE risk is also observed to be negatively correlated. Finally it paves the way for further research to be carried out on the factors outside the scope of this paper.

Annex 1: Questionnaire for investors

DSE Investor perception of risk in and return on Investment We are a group of students from IBA conducting a study on the factors that lead to the success and sustainability of Dhaka Stock Exchange (DSE). To understand these factors, we are seeking information from the viewpoint of the investors of the DSE on the risks and returns of investments in the DSE. All the data collected from respondents will be kept confidential and will only be used for the purposes of this course. If you are an investor in DSE, we will highly appreciate your help in filling out the following questionnaire. * Required Have you invested in Dhaka Stock Exchange (DSE) within the last 12 months? * Yes No

The following section contains some questions based on your reasons for investing in the DSE
Please rate this by degree of your preference. Consider 6=Most important and 1=Least important Did you invest in DSE because you find it enjoying? * 1 2 3 4 5 6

Do you invest in DSE because you find its return on investment high? * 1 2 3 4 5 6

Do you invest in DSE because of habit? * 1 2 3 4 5 6

Do you invest in DSE because of the excitement from gambling with stocks? * 1 2 3 4 5 6

If others, please specify

The following section contains some questions regarding your preference for different investment opportunities
Please rate each of the following investments according to return. 6=Very high return and 1=Very low return Bank Fixed Deposit Account * 1 2 3 4 5 6

Real Estate * 1 2 3 4

Dhaka Stock Exchange * 1 2 3 4 5 6

The following section contains some questions about your perception of risk in different investments
Please rate each of the following investment opportunities in terms of risk 6=Very high risk and 1= very low risk Real Estate * 1 2 3 4 5 6

Dhaka Stock Exchange * 1 2 3 4 5 6

4. Please feel free to give any additional comments

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Annex 2: List of References

Piety and Profits: Stock Market Anomaly during the Muslim Holy Month - Jedrzej Bialkowski, Ahmad Etebari, Tomasz Piotr Wisniewski Are Investors Moonstruck? Lunar Phases and Stock Returns - Kathy Yuan, Lu Zheng, Qiaoqiao Zhu Weak-form market efficiency of an emerging Market: Evidence from Dhaka Stock Market of Bangladesh - Assam Mobarek and Professor Keavin Keasey Time-Varying Volatility and Equity Returns in Bangladesh Stock Market - Syed A. Basher, M. Kabir Hassan, and Anisul M. Islam Volatility of Stock Return in the Dhaka Stock Exchange - Habibur Rahman, Sakhawat Hossain Market Efficiency, Time-Varying Volatility and Equity Returns in Bangladesh Stock Market - M. Kabir Hassan, Anisul M. Islam, Syed Abul Basher www.dsebd.org www.bangladesh-bank.org www.bbs.gov.bd www.thedailystar.net AT Capital Research - Bangladesh - Growth, Investment, Opportunity www.theindependent-bd.com
Bangladesh Economic Online