Determinants of Stock Prices in the Context of Dhaka Stock Exchange (DSE), Bangladesh
This study aims to examine the relationships between macroeconomic factors, remittances, price-to-earnings ratios, and stock prices in the context of Dhaka Stock Exchange (DSE) in Bangladesh. Correlational study will be used to explore the relationships between proposed variables. Secondary sources will be used to collect secondary data related to proposed variables on 30 DSE enlisted companies. Only few, selected number of variables will be used in determining the movements in stock prices instead of all of the potential variables. This study will provide important sights into the stock market in the present highly price volatile, unstable stock market of Bangladesh.
Keywords: Industrial Production, Exchange Rates, Money Supply, Consumer Price Index, Interest Rates, Remittances, Price-to-Earnings Ratios, Stock Prices, and Stock Market Bubble.
The stock market plays a significant role in mobilizing savings to increase the volume of investments, and this eventually increases the economy’s capacity for growth in terms of an increase in goods and services. A stock market is a public market for trading of stocks of the companies and is one of the main sources for companies to raise additional capital by issuing shares in the public market. Stock exchanges “, such as – Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE)” are the major players in the stock market and stocks of different organizations are listed and traded on these stock exchanges. Bangladesh has two stock exchanges; Dhaka Stock Exchange (DSE), and Chittagong Stock Exchange (CSE); and each has its own self-regulated, private sector entity which must have its operating rules approved by the Security Exchange Commission (SEC). In recent years, the stock market of Bangladesh became a real alternative to mobilize funds for investments due to positive developments in this sector, and firms in this continent is moving away from the traditional dependence on the banking system (Mansur, 2010).
This study will investigate the relationships between macroeconomic factors, remittances, price-to-earnings ratios, and stock prices in the context of Dhaka Stock Exchange (DSE) in Bangladesh. Earlier research, which will be extended by the researchers of this study, focused only on examining the relationships between macroeconomic factors; and stock prices in Cyprus (Tsoukalas, 2003). The present study differs from the previous study (Tsoukalas, 2003) by adding remittances, and price-to-earnings ratios to the previous framework to find out the individual relationships between variables.
Background of Dhaka Stock Exchange Ltd. (DSE)
The Dhaka Stock Exchange Limited (DSE) was incorporated in 1954 as East Pakistan Association Limited under the Companies Act, 1913, and was started formal trading in 1956 at Narayanganj after obtaining the certificates of commencement of business. In 1962, the East Pakistan Association Limited became public limited company, and the name was revised to East Pakistan Stock Exchange Ltd. But again the name of East Pakistan Stock Exchange Ltd. was changed to Dhaka Stock Exchange Ltd. in 1964. Currently, the Dhaka Stock Exchange (DSE) is registered as a public limited company and its activities are regulated by its Articles of Association rules & regulations; bye-laws along with the Securities and Exchange ordinance, 1969; Companies Act, 1994; and Securities & Exchange Commission Act, 1993. The major functions of Dhaka Stock Exchanges are- listing of companies, providing the screen based automated trading of listed Securities, settlement of trading, monitoring the activities of listed companies, market Administration & Control, announcement of Price sensitive or other information about listed companies through online, and so on. DSE has three major indices to reflect market behavior namely DSE All Share Price...
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