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Efficiency Analysis and Volatility Effect of Bangladesh Stock Market

In: Business and Management

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Department of Finance and Banking Jahangirnagar University
Savar, Dhaka FNB209: Financial Institutions and Markets |

Executive Summary Submission of the Report on :

Efficiency Analysis and Volatility Effect of Bangladesh Stock Market

Submitted by:Sariful Islam(Student ID: 610)Ashfaq-ul- haq oni(Student ID: 621)Jafrin Siddique (Student ID: 1922)Zunaid Hossain (Student ID: 1928)K. M. Zeman Adnan (Student ID: 2128)William Masterson Shah (Student ID: 2129) | Submitted to:Dr. Sheikh Abu TaherLecturer,Department of Finance & BankingJahangirnagar University |

August 2, 2012

Term Paper Topic:
Efficiency Analysis and Volatility Effect of Bangladesh Stock Market

Executive Summary:
This paper empirically examines the behavior of stock returns in the Bangladesh stock market namely Dhaka Stock Exchange (DSE), the efficiency of the market in pricing securities and the relationship between stock returns and conditional volatility and the impact of some institution factors such as lock-in, circuit breaker, and caretaker government on volatility, using best known three different daily price indices DSEG, DSI and DS20. The results of autocorrelation function, results of ADF and PP tests and also the results of ARIMA models do not support the hypothesis of weak-form of market efficient of DSE. The results of GARCH (p, q)-M models indicate significant departure from the hypothesis of weak form efficiency; the tendency for returns to exhibit volatility clustering; and a significant positive link between risk and returns for DS20, positive but not significant for DSI and negative and very insignificant for DSEG index. Thus it can be said that the mean variance hypothesis holds for DSE as the evidence is found that investors are rewarded for taking increased risk for the securities of DS20 and DSI but not for DSEG. It has been found that the imposition of lock-in and circuit breaker have significant negative impact on volatility in DSE. Thus the lock-in and circuit breaker systems significant contributed to the volatility of realized returns. Lastly it has been found that during time periods of the Caretaker Government of Bangladesh from 12th January 2007 to 6th January 2009, led to massive inflows of capital which were invested in the DSE, thereby significantly influencing its volatility.

Segmentation of works to be done:
Our group consists of six members. The members are: 1. Sariful Islam (ID: 610) 2. Ashfaq Ul Haq Oni (ID: 621) 3. Jafrin Siddique (ID: 1922) - Group Leader 4. Zunaid Hossain (ID: 1928) 5. K. M. Zeman Adnan (ID: 2128) 6. William Masterson Shah (ID: 2129)
The whole work will be done in four processes: 1. Relevant Data Collection: To complete a standard and effective report, we need to collect the data. For this purpose, we have appointed William Masterson Shah, K. M. Zeman Adnan and Jafrin Siddique to visit DSE Library, browse internet, and read articles on relevant subject. 2. Structuring the report: This process will be done by Sariful Islam and Ashfaq Ul Haq Oni. 3. Data Analysis: All the members will take part in the group study and analysis of data for the best output. This part will be lead by Zunaid Hossain Hridoy. 4. Preparing the Report: After analyzing the data, everyone will submit their thoughts regarding the result and will come to a conclusion of a final result. For the language, William Masterson and Jafrin Siddique will write and prepare the report.
The whole process will be monitored by our Group Leader Jafrin Siddique.

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