Chapter-1: Introduction

1.1 Introduction:

The volatility of the stock price is the crucial factor of the specific industry. The stock price
changes from one year to another year have a significant effect to the investors, shareholders and
the stakeholders. If the stock price of any specific industry is more volatile than other industry,
then the specific industry has the scope of the capital gain. The policy makers usually rely on the
market estimate of volatility as the barometer of the vulnerability of the stock market. Stock
return volatility represents the variability of day-to-day stock price changes over a period of
time, which is taken as a measure of risk by the relevant agents. 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. Excessive volatility also
reduces the usefulness of stock price as a reflector of the real worth of the firm. Volatility,
however, is not an evidence of irrational market behavior or inefficient markets. Stock return
volatility is usually asymmetric in its response to past negative price shocks compared with the
positive shocks, but what factors drive volatility over time is not clear. Moreover, increase in
firm-specific risk appears to adversely affect its stock valuation. In this paper the researcher
wants to try to determine the most volatile industry and how the volatility of stock price will
affect the overall performance of the industry. This study consists of six chapters. Both
theoretical and empirical aspects are narrated here in various chapters in this study. The first
chapter covers the introduction where are shown an overview of the total master`s paper,
literature review, rational of study, objectives of the study, methodology of the study, limitations
of the study and this part – chapter plan. The second chapter shows the overview of the Security
Markets in Bangladesh, the financial system in Bangladesh, the operation procedure in primary
and secondary market, the trading period and the overview of Security Exchange
Communication mission and function of security exchange communication. Third chapter of the
study presents the elaborate coverage of the Dhaka Stock Exchange. The formation, legal
control, management, trading time and the functions of the Dhaka Stock Exchange are shown in
this chapter. In the fourth chapter shows the concept of volatility, the components of stock
market volatility, stock market volatility and dividend and persistence of stock market volatility.
In the fifth chapter the analysis and interpretation of the study are represented. Here some graphs
and tables are used to analyze the collected data easily and to show the results of the study.
Comparison of overall industry wise stock price volatility is represented in this phase. In the last
chapter, chapter six presents the summary of findings, some recommendations for SEC, Clients
and the government and the conclusion of the study.

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1.2 Rational of the Study:

The stock market is a part ingredient of the financial system in Bangladesh. It is an important
avenue for channeling funds to investors through mobilizing resources from individuals. In view
of the rapidly increasing role of the stock market, volatility in stock prices can have significant
implications on the performance of the financial sector as well as the entire economy. There
exists important link between stock market uncertainty and public confidence in the financial
market. The researcher selects the topic of “A Comparative Study on Industry-Wise Volatility of
Stock Prices in DSE”. To read the overall research paper any new comer investors can easily
interpret the overall situations of industry-wise price volatility of stock market. This research
paper also helps the students to understand which industry`s price is more volatile and which
industry`s price is less volatile. If the stock price of any specific industry is more volatile than other
industry, then the specific industry have the scope of the capital gain. And another factor should be
considered that the high risks are involved in the more price volatile industry that is high risk and high
return in the price volatile industry. To study the overall literature reviews the researcher thinks that such
kind of work in the society is not so available for this reason the researcher takes this topic as a part
of research. The researcher thinks that from this research paper the government, the general
investors, the speculators and overall society in this country will be beneficial to learn which
industry is more volatile and which are less. The rational and long term investors generally select
the industry whose price is less volatile and short term investors and speculators want to invest
high volatile industry. This research paper will be beneficial for investment decision making all
short term and long term investors.

1.3 Literature Review:

Ahmed, H.U, & Samad, Q. A. (2008), examined the topic of “Performance Level of Dhaka Stock
Market: A Quantitative Analysis”. The result shows the overall situation of the Dhaka stock
market. This paper published the Daffodil International University Journal of Business and
Economics.

Haque and Hassan (2000) examined the topic “Return-volatility behavior of a number of
emerging market economies dotting in the global landscape”. They found that return volatility
from one company to another may significantly affects the investment decision of shareholders.
This paper published the journal of Applied Financial Economics.

Akhter and Quddus (1996) reveal that initial subscriber obtain the same return whenever they
dispose of their shares in Initial Public Offerings (IPOs) in a short period of about five or six
months. They used mean adjusted performance index to analyze price behavior of unseasoned
new issues from the point of view of initial subscribers who are interested only in short-run.
They found that the standardized mean excess return were virtually the same in first 30 trading
days and concluding 30 trading days of the first 100 trading days since debut.

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Imam and Amin (2004) found that” The volatility of the stock return of Bangladesh Capital
Market” It has been observed that the volatility predicted this period has more influence in
forecasting volatility for the next period. For the DSE return series volatility clustering is said to
be persistence implying that in Dhaka Stock Market today’s return has a large effect on the
conditional forecast variance many periods in the future. This finding suggests that current
information has no effect on long run forecasts, rather, volatility shocks than the volatility
estimated at earlier period influence more in estimating future volatility.

Md. Tariqur Rahman ,July( 2011) examined the topic “Capital Market of Bangladesh: Volatility
in the Dhaka Stock Exchange (DSE) and Role of Regulators” The paper attempts to identify the
casual relationship between the observed volatility in the country’s major bourses namely the
Dhaka Stock Exchange (DSE) and the regulatory decisions taken by the SEC empirically. Using
Vector Auto-regressive (VAR), statistically highly significant relationship was found between
decisions taken by the regulatory authority and market volatility, although the direction of
causality is in reverse order than theoretically and empirically expected. Again, though the
number of decisions taken by the SEC immediately, with longer time the response was in
opposite direction than expected. This article published by Canadian Center of Science and
Education.

Rayhan, et al. (2011), revels the topic “The Volatility of Dhaka Stock Exchange (DSE) Returns:
Evidence and Implications” The main focus of the study is on detecting the pattern and reasons
behind the volatility of the monthly stock returns of the DSE and to search the possible solutions
thereto. The data set consists of monthly DSE General Index which covers the twenty- three-
year-long period commencing from January 1987 to March 2010. The study recommends careful
monitoring of volatility by the concerned authority, if necessary. It also recommends making
available all relevant information, to ensure adequate supply of stock through active participation
of the government and giant national and multinational companies, and asset securitization, and
to establish proper risk-return relationship and so forth. This is published ASA University
Review.

Nayeem et al. (2012), revels the topic “Is the Stock Market Overvalued: A Study in the Context
of Bangladesh?” The primary objective of this paper is to analyze if the Market overvalued. The
analysis was completed in two stages. At first stage analyzed each of the 17 companies to
determine the condition of each company. The second stage of the analysis is composed of 17
companies share prices along with examination of capital accumulation in corresponding period.
This result also shows that the market overvalued. From my analysis a relationship has been
found between mass capital accumulation and Market Overvalued. This paper is published in the
Asian Business Review.

Rahman and Hossain,( 2008), examined the topic “Volatility of Stock Return in the Dhaka Stock
Exchange” This note examines the volatility in stock prices in the Dhaka Stock Exchange (DSE)
during 2003-2007. Excessive volatility and fluctuations in stock price fail to provide the correct

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signal on company’s real worth although stock prices generate useful information to ensuring
efficiency of markets in the real world. Stock price volatility, however, is not an evidence of
irrational market behavior or inefficient markets. The absence of price variation may result in a
loss of investors’ interest to participate in the market. This paper is published in the Applied
Financial Economics.

Ariful Haque Choudhury, (2013) examines the topic “Stock Market Crash in 2010: An Empirical
Study on Retail Investor’s Perception in Bangladesh” Bangladesh has confronted two big crashes
in 1996 and in 2010. People with little knowledge entered into the market to make profit. Around
3.3 million people were affected by the market crash 2010. Lack of restriction on opening B/O
accounts, speculations through omnibus account, wrong placement of IPOs , violation of banking
act, rumor spread by the brokers and the dealers, wrong application of book building method,
wrong method used in face value determination, lack of monitoring in the share market, all these
together created the devastating outcome. People from the various income levels came to the
market and lost much of their capital.

Khadiza Tul Tahera,(2014) examines the topic “Share Market in Bangladesh; Its Impulsive
Attitude towards Investors and the Reasons behinds These Spontaneous” Financial Markets are
absolutely vital for the proper functioning of economic activities as they serve to control funds
from servers to borrowers. This paper is all about share market analysis and the reason behind
the crash in share market in these mentioned years. The researcher tries to cover up all possible
ways to stable this unpredictable market.

1.4 Objectives of the Study

Broad Objectives:

This study will try to find out the overall industry- wise piece volatility of the stock in the DSE
and focus on developing a road map for promoting sustainable capital market regulatory
framework in Bangladesh.

Specific Objectives:

 To analyze and identify a comparative volatility among various banks which are
listed in DSE.
 To analyze and identify the price changes from 2000 to 2016 in various
companies in investment sectors.
 To review the volatility of price of various companies in engineering industries.
 To review the volatility of prices among various companies in the food and allied
industry.
 To review the changes in price of fuel and power industry.

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  To analyze the volatility of prices among various companies in the jute industry.
 The overall comparative study.

1.5 Methodology of the Study:

1.5.1 Data Collection

Data on after six months price fluctuation the selected companies associated with Dhaka Stock
Exchange (DSE) for the period from 2000 to 2016 were collected and analyzed from the annual
reports of the respective companies, daily price quotation of DSE and DSE library.
In this study the researcher considers 18 industries with its 131 listed companies in Dhaka Stock
Exchange for the period of 2000 to 2016. Summary of sample is stated in the following table:

Table 1.5.1: Summary of sample firms

Industry Classification No. of Firms
Banking 10
Investment 10
Engineering 10
Food and Allied 10
Fuel and Power 10
Jute 3
Textile 10
Pharmaceuticals and Chemical 10
Paper and Printing 6
Cement, and Misc. 7
Information Technology 6
Tannery 5
Ceramics 5
Insurance 10
Corporate bond 3
Telecommunication 2
Travel and leisure 4
Miscellaneous 10
Total 131

1.5.2 Data Source

This study is graphically descriptive in nature. Data is collected from both Primary (Stock
Exchange, SEC) and secondary sources like different publications of DSE, Bangladesh Bank,
ADB, WB and IMF. Some other sources these are...

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1. The Daily Basis General Price Index from DSE.

2. DSE and Daily price quotation, DSE

1.5.3 Analysis Technique/method

1.5.3.1 Qualitative analysis: This study will try to examine the industry-wise price volatility
and will focus more qualitative analysis techniques.

1.5.3.2 Quantitative Analysis: In this study, the researcher will also use quantitative
techniques to analyze data. Software’s like, Excel has been used for the research.

1.6 Limitations of the Study:

There are number of limitations in this study. Despite all, out effort on my part the report suffers
from a number of limitations. The limitations are:
i) The primary limitation of the study is the time constraint. It is tough to work with the
actual price volatility of overall industries which are listed in DSE and its reforms
only within three months in the midst of two other courses.
ii) Secondly, it was not possible to use statistical sampling technique as it is very
difficult due to time and resource constraints, I had to use random sampling to gather
information. As a result there exists some risk to draw a conclusion at an identical
point of view.
iii) Unavailability of published documents relating to the topic of the study restricts the
effluence of effort to enrich the study.
iv) All data are secondary and thus problems were faced in collection of data.
v) Finally, due to my inexperience of under taking such a huge task, there might be
some unintentional mistakes in the report.

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 Chapter-2: The Dhaka Stock Exchange

The Dhaka Stock Exchange (DSE) (Bengali: ঢাকা স্টক এক্সচেঞ্জ Dhaka stôk ekschenj), located
in Motijheel, Dhaka, is one of the two stock exchanges of Bangladesh (the other being the
Chittagong Stock Exchange). In 2015, the combined market capitalization of listed companies on
the Dhaka bourse stood at over $40 billion. The Dhaka Stock Exchange is founded in the year
1952. The owner is the Dhaka Stock Exchange Limited. The key person is the Dhaka Stock
Exchange Md. Rakibur Rahaman. The currency used in the Dhaka Stock Exchange is Taka. All
the listing company which are enlisted in the Dhaka Stock Exchange use taka as a currency. The
numbers of listing companies which are enlisted in the Dhaka Stock Exchange are 750
companies. The total market capital in the Dhaka Stock Exchange is US $40.5 billion and the
volumes of capital in each year are US $330 billion. The indices which is used in the Dhaka
Stock Exchange is DSE 20 index.

In the early part of 1952, about five years after the independence of erstwhile Pakistan in 1947,
the East Pakistan Stock Exchange Association Ltd., an independent Stock Exchange, was
incorporated on April 28, 1954. It changed name to the East Pakistan Stock Exchange Ltd. on
June 23, 1962 and finally to its present name of the Dhaka Stock Exchange Ltd. on May 14,
1964. However, formal trading began in 1956 with 196 securities listed on the DSE with a total
paid up capital of about Taka 4 billion. After 1971, the trading activities of the Stock Exchange
remained suppressed until 1976 due to the liberation war and the economic policy pursued by the
then government. The trading activities resumed in 1976 with only 9 companies listed, having a
paid up capital of Taka 137.52 million on the stock exchange,

2.1 The History of Dhaka Stock Exchange:

First incorporated as East Pakistan Stock Exchange Association Ltd on 28 April 1954 and started
formal trading in 1956. It was renamed as East Pakistan Stock Exchange Ltd on 23 June 1962.
Again renamed as Dacca Stock Exchange Ltd on 13 May 1964. After the liberation war in 1971
the trading was discontinued for five years. In 1976 trading restarted in Bangladesh, on 16
September 1986 DSE was started. The formula for calculating DSE all-share price index was
changed according to IFC on 1 November 1993. The automated trading was initiated on 10
August 1998 and started on 1 January 2001. A Central Securities Depository System was
initiated on 24 January 2004.As of 16 November 2009, the benchmark index of the Dhaka Stock
Exchange (DSE) crossed 4000 points for the first time, setting another new high at 4148 points.
In 2010, the index crossed 8500 points and finally crashed in the first quarter of 2011. Millions
of investors lost their money and came out onto the street blaming the speculators and regulators
for the bubble that finally burst in what became known as the 2011 Bangladesh share market
scam. Currently there are total 22 industrial sectors in DSE which accommodates 750 listed
companies.

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2.2 Formation of Dhaka Stock Exchange:

Dhaka Stock Exchange (DSE) is a public limited company. It is formed and managed under
Company Act 1994, Security and Exchange Commission Act 1993, Security and Exchange
Commission Regulation 1994, and Security Exchange (Inside Trading) regulation 1994. The
issued capital of this company is Tk. 500,000 which is divided up to 250 shares each pricing Tk.
2000. No individual or firm can buy more than one share. According to stock market rule only
members can participate in the floor and can buy shares for himself or his clients. As of 16
November 2009, the benchmark index of the Dhaka Stock Exchange (DSE) crossed 4000 points
for the first time, setting another new high at 4148 points. In 2010, the index crossed 8500 points
and finally crashed in the first quarter of 2011. Millions of investors lost their money and came
out onto the street blaming the speculators and regulators for the bubble that finally burst in what
became known as the 2011 Bangladesh share market scam. Currently there are total 22 industrial
sectors in DSE which accommodates 553 listed companies. At present it has 750 numbers of
listing companies. Market capitalization of the Dhaka Stock reached $40.5 billion in June 2016.

2.3 Legal control of Dhaka Stock Exchange:

The Dhaka Stock Exchange (DSE) is registered as a Public Limited Company and its activities
are regulated by its Articles of Association rules & regulations and by-laws along with the
Securities and Exchange Ordinance - 1969, Companies Act - 1994 & Securities & Exchange
Commission Act - 1993.

2.4 Management of Dhaka Stock Exchange:

The management and operation of Dhaka Stock Exchange is entrusted on a 25 members Board
of Director. Among them 12 are elected from DSE members, another 12 are selected from
different trade bodies and relevant organizations. The CEO is the 25th ex officio member of the
board. The following organizations are currently holding positions in DSE Board:

 Bangladesh Bank
 ICB
 President of Institute of Chartered Accountants of Bangladesh
 President of Federation of Bangladesh Chambers of Commerce and Industries
 President of Metropolitan Chambers of Commerce and Industries
 Professor of Finance Department of Dhaka University
 President of Dhaka Chamber of Commerce & Industry (DCCI)

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2.5 Trading Time of Dhaka Stock Exchange:

The Dhaka Stock Exchange is open for trading Sunday through Thursday between 10:30 am –
2:30 pm Bangladesh Standard Time, with the exception of holidays declared by the Exchange in
advance. In the month of Ramadan, the exchange is open for trading between 10:30 am –
1:30 pm Bangladesh Standard Time.

2.6 Functions of Dhaka Stock Exchange:

 Listing of Companies (As per Listing Regulations).

 Providing the screen based automated trading of listed Securities.
 Settlement of trading (As per Settlement of Transaction Regulations).
 Gifting of share / granting approval to the transaction/transfer of share outside the
trading system of the exchange (As per Listing Regulations 47).
 Market Administration & Control.
 Market Surveillance.
 Publication of Monthly Review.
 Monitoring the activities of listed companies (As per Listing Regulations).
 Investor’s grievance Cell (Disposal of complaint buy laws 1997).
 Investors Protection Fund (As per investor protection fund Regulations 1999).
 Announcement of Price sensitive or other information about listed companies
through online.

2.7 Stock Market Crash:

The objective of this section is to provide knowledge to the readers about typical stock market
crashes and its causes of ‘Bull Run’. In addition factors for crashes and role of different market
participants including regulators before, during and after the crashes. Two different crashes will
be introduced from international perspective (American) which is stock market crash of 1987
and Bangladesh stock market crash of 1996.

2.8.1 Stock Market Crash of 1987:

In the last century the most significant stock market crashes of the U.S. were crash of 1929 and
1987. This part of the study will briefly explain about the stock market crash of 1987.

2.8.2 Background of the Crash:

The crash of 1987 is known as “Black Monday” which wiped out over 500 billion of dollars of
investors. During the first 6 months of 1987 the value of the U.S. dollar declined comparing to
other currencies of the world. As a result, products & services of the U.S. became less expensive
to other countries. So, the figure of exports increased and companies experienced more earnings
and growth of stock prices in the equity market. Prior to the crash, stock market was posting
strong gains almost of 1987. The development of the U.S. market attracted foreign investors and
foreign investment doubled between 1986 & 87 which helped to increase the stock prices. In the
period of 1980s inflow of new investors helped to increase market demand and support prices of
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market instruments. As the development of market infrastructure, Program trading strategies
were adopted in the capital market for quick trading. One strategy was “portfolio insurance”
which was designed to minimize loss of investors during falling market limiting weight of stocks
and increase weight in rising market. Another model was “index arbitrage,” that suggests making
profit by buying and selling stocks comparing the value of stocks between in an index and stock-
index futures contracts. Then the rule that prohibited short-sales for this kind of trade brought
difficulty for arbitragers. New York Stock Exchange (NYSE) executed program trading with the
support of designated order turnaround (DOT) system. Before the crash the macroeconomic
picture experienced increasing interest rate all around the world and inflation. (Carlson, 2006)
The ‘Bull Run’ of forming bubble in the market continued for five years started from 1982.

2.8.3 Reasons behind the Crash:

Different analysts found different factors affecting the stock market crash of 1987. Some are
found common by analysts and some are not. The considerable reason of the crashes pointed by
different market analyst, economists and organizations depicted be-low:

Margin Calls & Illiquidity:

When investors pay a part of future market contracting by cash or selected instruments in an
account with a broker which is called Margin. To make sure obligations of investor when
contract expired, more Margins is necessary if value of the contract decreases. The process is
called Margin call. On “Black Monday”, price movement of future contracts created record
amount of Margin calls for firms which were about 10 times the average size. Collected
payments are paid to investors whose position had gained. Some investors lost their ability to
enter new positions due to Margin calls and some needing to extend credit to make the payment.
As investors were unable to pay margins, brokers placed emergency margin calls with exposed
options positions which were assumed to be liquidated due to failure of meeting margin calls. It
occurred repeatedly which possibly made selling pressure in the market and markets were not
able to handle these sell orders.

Scarcity of information or reliable information:

According to Carlson (2006) noted from the survey report of Robert Shiller on market
participants of Black Monday, investors were reacting more to the price movements than to any
particular news. Some stocks were not traded on time which did not provide correct information
about price quotes and stock indexes. Moreover, quick price movement and rumor about market
closing leaded investors to place to sell orders.

Program Trading:
Summit Financial Advisors has stated that many analysts accused program trading, especially
portfolio insurance as a major reason for the crash. In this trading, computers automatically order
large stocks trades when certain market trends prevailed. Analysts blamed that the program
trading blindly sold stocks when prices declined on 19th October.

Derivative Securities:
Investors not only invested in actual stock market but also in index options and futures markets.
Option and future market are called derivatives as the value derives due to change of stock

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prices. The Brady Commission which was commissioned to examine the reasons of the crash
found that the failure of stock markets and derivatives markets to operate in sync was an
important factor that contributed to the severity of the crash.

Trade & Budget deficits:

The news of huge U.S. trade deficit drove investors into thinking that stock prices of the U.S.
will decline discussed by Itskevich (2002). Treasury Secretary James Baker suggested that there
is a need for fall in dollar which compelled foreign investors to pull out their dollar- denominated
investment.

2.8.4 Steps Taken after the Crash:

Federal Reserve and other market regulators implemented their efforts to improve market
conditions and its weak fundamentals. (Federal Reserve immediately took necessary steps to
regain market declines and bring confidence among investors. Tuesday morning just after the
Black Monday, Federal Reserve announced that it will support market liquidity which brought
confidence among investors and significant gain of the market. Federal Reserve worked with
banks and securities firms for enough credit to make sure liquidity & funding of brokers and
dealers. Officials of the Federal Reserve Bank of New York called to senior management of
different New York City banks to continue availability of credit for clearing house members to
meet necessary margin payments. (Carlson, 2006) New computer trading systems were installed
in the stock exchanges to develop data management effectiveness, accuracy, efficiency, and
productivity. Margin requirements were changed to decrease volatility for stocks, index futures,
and stock options. The Chicago Mercantile Exchange and the New York Stock Exchange
adopted a circuit breaker mechanism. The aim of the circuit breaker is; trading would be halted
for one hour if Dow falls over 250 points and for two hours if point falls for more than 400
points. (Beginners-stock-investing-guide, 2006-2011)

2.9 Stock Market Crash of Bangladesh in 1996:

2.9.1 Background:
The scenario of stock market crash in 1996 and crash in 2010-11 are totally different. The
number of BO account holders was only 300,000 and most of them were very new in the market.
During the crash of 1996 paper shares used to be sold in front of DSE and it was not easy for
investors to identify fake and original shares. The market was enough developed to gain
confidence of investors. There was no automated trading sys-tem, surveillance was not enough
strong and no circuit breakers as well as international protections. From 1991 to the end of 1995
DGEN price index gained by 139.3% and reached to 834 point. But in 1996 the market
experienced dramatic change and pushed the price index up by 337%. DGEN Index recorded
high growth from July and stood at 3648.7 points or by 280.5% on 5th November 1996.
Besides, Chittagong Stock Exchange experienced the same change and grew by 258%.
Chittagong stock exchange index increased from 409 to 1157 points in 1996 within one year
time. During the ‘Bull Run’ period new records were posted almost every day in both bourses for

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example market capitalization achieved to $2 billion which is equal to 20% of total GDP. As
market became overheated government took step by selling state owned institutions and Taka 2
billion will be given to ICB for buying shares and support the market. But the steps taken by the
government did not work. Finally abnormal rise of share prices started to fall and Bangladesh
stock market experienced its first crash of the history in 1996. The index lost over 233 points on
Nov 6, 1996. After the bubble burst DGEN index dropped to its lowest point and stood at 957 in
April 1997. It stood at around the same point where it was 10 months before and DSE General
Price index lost almost 70 percent from its highest point of November 1996. Then index
continued to decrease for next 7 years until April 2004. During this long time period DGEN
Index seldom crossed 1000 point of the index.

2.9.2 Reasons:
In the research article, Effect of Policy Reforms on Market Efficiency: Evidence from Dhaka
Stock Exchange, Alam and others mentioned that some foreign portfolio managers, few brokers
and sponsors and sponsors of few listed companies were behind the stock price manipulation in
October 1996. As a result all share price index of DSE dramatically sky rocketed to 3600 point
from 1000 point in six monthstime. Few foreign & local investors that had inside information
made huge profit and a lot of general investors paid heavily.The cause of stock market crash in
1996 was the failure of market regulators mentioned by Afroz (2006). Stock exchanges did not
take any action against the dramatic price in-crease of listed securities during June to November
1996. Bubble formed due to abnormal demand of securities by new investors where the numbers
of listed securities were very few. The delivery versus payment (DVP) system of trading used to
allow buyer-seller to settle their transactions between them without stock exchange participation.
Many brokers/dealers used it as a tool to show fake trading to increase demand of share from the
general investor’s side. According to Bangladesh Bank analysis that there was an unauthorized
market consisting of over 25,000 investors outside the stock exchange where securities were
traded at a very high price. Moreover, SEC could not handle the crisis for its defective
infrastructure. Weak regulations and surveillances could not monitor market manipulators and
market intermediaries. Even information inefficiency, artificial financial statements certified by
chartered accountants, false information and rumor were other important factors that overheated
the market and burst the bubble. (Afroz, 2006)

2.10. Stock Market Crash of Bangladesh 2010-2011:

History of the stock market crashes show that ‘Bull Run’ before a stock market crash is kind of
normal phenomenon. There was no exception for the stock market crash of Bangladesh in 2010-
11. Most important factors that guided to the Bull Run are de-scribed here.

2.10.1. Root of Bubble:

Due to political unrest of Bangladesh state of emergency was declared and military took power
of the country in 2007. During military-backed regime investment in real sectors as well as FDI
decreased but the inflow of foreign remittance increased. Investors tried to find alternative
investment sector to invest their savings and found stock market as an attractive alternative.
According to CPD (2011), the total number of BO Account holders on 20th December, 2010
reached to 3.21 million though the number was 1.25 million in December 2009. Most of these
new investors don’t have enough knowledge about the stock market but invest their most or all

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savings in the market. 238 brokerage houses opened 590 branches at 32 districts. As CPD (2011)
found, internet-based trading operation, opening branches of brokerage houses across the
country, easy access to the market information, arranging a countrywide 'share (fair)' are the
factors for increasing investors. But supplies of new securities through IPOs were not enough to
chase huge capital of too many investors in the market. Banks & other financial institutions of
Bangladesh had a lot of excess liquidity due to less business opportunities in the recession period
of 2009-10. To minimize the cost of bearing excess liquidity and as a great opportunity, theses
financial institutions & its officials as well as other people took loan and invest in the share
market. This made a huge influx of liquidity in the share market. It was seen that the daily
transaction in the share market was on an average from Taka 20,000 to 30,000 million in 2010
and the figure was double comparing to 2009. To grow Bangladesh`s economy by 7-8% per
year Bangladesh Bank adopted accommodative monetary policy during the high inflation periods
to support investment. Bangladesh Bank has pegged Taka against dollar to support exports. As
Taka has been undervalued it has made excess growth in money supply. Last couple of years
broad money made excess liquidity and the main motive behind it was Bangladesh Bank`s ex-
change rate policy. A big portion of this excess liquidity had gone to the stock market but there
were very few shares in the market. The policy that was adopted by BB to grow economy by
increased exports & investment eventually misguided and ended up blowing the mother of all
bubbles. Then government again fuelled the bubble after permitting whitening of black money
through tax breaks and schemes. (Rahman, 2011)
Moreover Security & Exchange Commissions was not capable to monitor the market conditions
properly. Due to the poor monitoring & market surveillance share prices of Z Category
Companies and small companies increased dramatically. Moreover, some initiatives taken by
SEC were not effective and changed directives frequently such as; it changed directives of
margin loan ratio 19 times.

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 Chapter-3: An Overview of the security
Markets in Bangladesh

3.1 Financial System of Bangladesh: Basic Concept

The financial system is a set of institutional arrangement through financial surpluses in the
economy are mobilized from surplus units and transferred to deficit spenders. Creating and
supporting efficient financial systems should be a high priority in development. Much of the
wealth of developing countries remains invested in traditional savings vehicles such as gold,
land, or “cash under the mattress”. But formal savings systems provide a more productive and
often safer conduit for funds than these other alternatives. The formal financial system when
efficient, well regulated and competitive or at least contestable can offer lower intermediation
costs than informal channels. The main constituents of any financial system are: financial
institutions, financial instruments and financial markets.

Financial Institutions: The modern name of financial institution is financial intermediary; it

mediates or stands between ultimate borrowers and ultimate lenders. Financial institutions are
generally classified under two main heads: a) Banks and b) Non-Bank Financial Intermediaries.
Financial intermediaries include banks (central bank, commercial banks, investment banks etc.),
Securities and Exchange Commission (SEC), specialized financial institutions, development
financial institutions and institutional investors (i.e. Investment Corporation of Bangladesh).

Financial Instruments: Financial Instrument is the financial claim of the holder against the
issuer. Financial Instruments are of two types: Primary or Direct and Secondary or Indirect
Financial Instruments. Primary or direct financial instruments are financial claims against real
sector units. Secondary or indirect financial instruments are financial claims against financial
institutions or intermediaries.

Financial Markets: Financial market is the market where financial instruments are purchased
and sold. The market can be classified into a number of ways, but from the duration point of
view, it is classified into two: money market and capital market.
(1) Money market is a market where financial securities maturing in less than one year that is
short-term fund are transacted. Typical money market instruments are certificates of deposits,
treasury bills, post office savings etc.
(2) The Capital market is a market for long-term funds. It facilitates an efficient transfer of
resources from savers to investors and becomes conduits for channeling investment funds from
investors to borrowers. The capital market is required to meet at least two basic requirements: (a)
it should support industrialization through savings mobilization, investment fund allocation and
maturity transformation and (b) it must be safe and efficient in discharging the aforesaid
function. It has two segments, namely, securities segments and non-securities segments.

14 | P a g e
Securities Segments - The securities segment is concerned with the process a firm distributes its
securities to the public in the primary market and the securities are then traded in the secondary
markets. Financial intermediaries, such as merchant banks, Asset Management Company,
underwriters, broker-members etc. are involved in the process. Securities segments of capital
market have two important roles to play: (a) information production and (b) monitoring. Security
segment of the markets can be divided into two:

(1) Primary or New Issue Market: The market in which newly issued securities are sold by
their issuers, who received the proceeds. Securities are issued in the primary market by one or
more of the following methods:
(a) Public Issue: An offer to the public by an issuer through a prospectus for subscription. This is
the most common method of primary market placement in Bangladesh.
(b) Private Placement: An offer to specific known persons selected by the sponsors for procuring
subscription.
(c) Right Issue: An offer in which existing shareholders are offered new securities in proportion
to their existing holdings.
(d) Offer for Sale: An invitation to the general public to purchase the stock of a company through
an intermediary.
(2) Secondary Market: Market that permits trading in outstanding issues; that is, stocks or
bonds already sold to the public are traded between current and potential own secondary market
do not go to the issuing unit, but rather to the current owner of the security. Again secondary
market has four parts:
(a) Organized Stock Exchange: Securities are traded according to organized rules and
regulations.
(b) Over-the-counter (OTC) Market: OTC market includes trading in all stocks not listed on one
of the exchanges. The OTC market is not a formal organization with membership requirements
or a specific list of stocks deemed eligible for trading. In theory, any security can be traded on
the OTC market as long as a registered is willing to make a market in the security (willing to buy
and sell shares of the stocks). Generally companies which are unable and unwilling to enlist,
float their shares in the OTC market.
(c) Third Market: The term third market describes over the- counter trading of shares listed on an
exchange.
(d) Fourth Market: The term fourth market describes direct trading of securities between two
parties with no broker intermediary. In all most all cases, both parties involved are institutions.

15 | P a g e
3.2. Operational Procedures in Primary and Secondary Markets:

Securities market operation means primary and secondary market operations. Affairs of the
primary market can be handled easily. The entire process of allotment is executed under the
instruction of the regulatory authority. SEC has been successful in obtaining maximum
disclosure through prospectus, which is approved by them. Primary market is also a one-way
traffic. It is the secondary market where lie all actions, thrill and tensions. In fact secondary
market is a complex one. It may have the problem of insider trading, market rigging and
manipulation .Hence the regulating authority’s main thrust is upon the rules and regulations of
the bourses, obviously with a view to protecting the interest of the investors. Most of these are
prepared by the bourses themselves as Self-Regulatory Organization (SRO). The floor where the
secondary market operations conducted is known as stock exchange, in French it is “Bourse” and
“Bolsa” in Latin America. The stock exchange has been operating for the last three centuries and
the number is increasing day by day. During this long period there has been a sea change in the
operational procedure of the stock exchanges. In earlier days how did it operate? Let us read the
following comments on London Stock Exchange by an anonymous commentator in 1695, “The
howling of the wolf, the grunting of the dog, the braying of the ass, the nocturnal wooing of the
cat, all these in unison could not be more hideous than the noise which these being make in the
Stock Exchange” But now electronic media and state of the art technology on securities market
have brought tremendous changes. In most developed countries the investors no more rush to the
Stock exchanges. Even brokers do not bother to go there rather transactions are carried through
computer terminal and deals are auto matched. Some countries have even adopted scrip less
trading. ‘Central Share Depositories’ maintain record through book entries of distinctive
numbers and shares have been dematerialized. Here in DSE (Dhaka Stock Exchange) and CSE
(Chittagong Stock Exchange) trading system is fully automated screen based.
Both the Stock Exchanges of Bangladesh provide Clearing Services for members through their
Clearing Houses. The Clearing House acts as a common agent between members by delivering
and receiving their securities. Custodian services in Bangladesh are provided by the Standard
Chartered Bank. The following services are available to foreign investors: 1) Settlement, 2)
Safekeeping, 3) Registration, 4) Corporate Actions, 5) Proxy Voting, 6) Client Reporting, 7)
Cash Management, 8) Market information. Under Securities and Exchange Commission Act,
1993 all players of the securities markets, like brokers, managers to issues, underwriters,
investment advisors are to obtain licenses from SEC.

16 | P a g e
3.3. Trading Period

2.3.1. Pre-Opening Session

Order entry, deletion/modification of limit orders is only permitted; execution of orders shall not
be done during this session. The previous day’s closing price and index will be available to the
dealers/brokers during this session.

3.3.2. Opening Session

During this session Matching of orders shall be done at opening price. The opening price of a
security shall be the price at which maximum number of securities is matched. In the event of
being no trade for certain securities, then the last closing price for the security shall be made the
opening price for the day. No order entry shall be permitted during this session.

3.3.3. Continuous Trading Session

Orders shall be executed during this session and if an order cannot be executed in whole or in
part, then it will be stored as an unfilled order. Unfilled orders from the preopening session shall
be carried forward with time stamp to this session.

3.3.4. Closing Session

No order is received in this session. Pending orders executable at closing price and orders ‘match
at closing price’ shall be executed in this session.

3.3.5. Close Price Trading Session

Only ‘match at closing price’ order and all executable pending orders shall be executed in this
Session at closing price. If any ‘match at closing price’ order is not executed in whole or in part,
it will be removed from the system automatically and all other pending orders except the expired
ones shall be carried forward to the following trading day.

3.3.6. Post-Closing Session

The trading members will make enquiries, verify, and down load the daily transaction details in
this session.

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3.4. Securities and Exchange Commission (SEC):

The Bangladesh Securities and Exchange Commission (BSEC) is the regulator of the capital market of
Bangladesh, comprising Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). The
Commission is a statutory body and attached to the Ministry of Finance. In order to protect the interest of
investors in securities, and to develop a viable securities market the Securities and Exchange Commission
(SEC) was established on 8th June of 1993 under the Securities and Exchange Commission Act.
Consistent with overall policies, SEC is supposed to act as a central regulatory agency performing wide
range of functions covering the entire capital market including the proper issue of capital, the
establishment of fair trading practices and the close supervision of issuers, markets and intermediaries 48
Md. Ariful Islam et al.: Stock Market Volatility: Comparison Between Dhaka Stock Exchange and
Chittagong Stock Exchange Monitoring and supervision by the commission The Commission monitored
compliance of laws by public listed companies, stock exchanges and stockbrokers/ dealers. Among others
[13], the Commission monitored whether-

i) Annual general meetings (AGMs) were held on time by public listed companies;
ii) Declared dividends were paid on time by public listed companies;
iii)Share certificates were issued on time by public listed companies;
iv) Funds raised by IPO or right share were utilized by public listed companies as per financial and
physical plans approved by the Commission;
v) Half-yearly accounts were issued by public listed companies on time
vi) Financial statements complied with the disclosure requirements prescribed by law;

3.4.1 Mission:

i) Protect the interests of securities investors

ii) Develop and maintain fair, transparent and efficient securities market
iii) Ensure proper issuance of securities and compliance with securities laws

3.4.2 Functions:

i) Regulating the business of the Stock Exchanges or any other securities market.
ii) Registering and regulating the business of stock-brokers, sub-brokers, share transfer
agents, merchant bankers and managers of issues, trustee of trust deeds, registrar of an
issue, underwriters, portfolio managers, investment advisers and other intermediaries in
the securities market.
iii) Registering, monitoring and regulating of collective investment scheme including all
forms of mutual funds.
iv) Monitoring and regulating all authorized self-regulatory organizations in the securities
market.
v) Prohibiting fraudulent and unfair trade practices relating to securities trading in any
securities market.

18 | P a g e
 vi) Promoting investors’ education and providing training for intermediaries of the
securities market.
vii) Prohibiting insider trading in securities.
viii) Regulating the substantial acquisition of shares and take-over of companies.
ix) Conducting research and publishing information.

Bangladesh Security Exchange Communication was established on 8 June 1993 under the
Securities and Exchange Commission Act, 1993. The Chairman and Members of the
Commission are appointed by the government and have overall responsibility to administer
securities legislation. The Commission, at present has three full-time members, excluding the
Chairman. The Commission is a statutory body and attached to the Ministry of Finance. Initially
named simply as the Securities and Exchange Commission, on 10 December 2012, its name was
officially changed to the Bangladesh Securities and Exchange Commission. During the 2011
Bangladesh share market scam the BSEC withdrawing various directives given earlier to help
stabilize trading at the Dhaka Stock Exchange and was criticized by some commentators for its
actions during the subsequent crash.

19 | P a g e
 Chapter-4: The Concept of Volatility

Volatility is a basic statistical measure. It can be used to measure the market risk of a single
instrument or an entire portfolio of instruments. While volatility can be expressed in different
ways, statistically, volatility of a random variable is its standard deviation. In day-to-day
practice, volatility is calculated for all sorts of random financial variables such as stock return,
interest rate, the market value of portfolio, etc. stock return volatility measures the random
variability of the stock returns. Simply put stock return volatility in the variation of the stock
return in time. More specifically, it is the standard deviation of the daily stock return around the
mean value and the stock market volatility in the return volatility of the aggregate market
portfolio.

4.1. Components of Stock Market Volatility:

Researchers have sought to analyze the relative importance of economy-wide factors, industry-
specific factors, and firm-specific factors on a stock's volatility. This approach borrows from
modern asset pricing theory and its emphasis on so-called factor models, or models that assume a
firm's stock return is governed by factors such as the overall market return, the return on a
portfolio of firms sampled from the same industry, or even changes in economic factors such as
inflation, changes in oil prices, or growth in industrial production. If returns have a factor
structure, then the return volatility will depend on the volatilities of those factors. Campbell, et
al. (2001) assume the factors are the overall market return, an industry return (e.g., financial,
industrial, etc.), and an idiosyncratic noise term that captures firm-specific information. They
document the important empirical fact that while volatility moves considerably over time, there
is not a distinct trend upwards or downwards. More interestingly, however, since 1962, there has
been a steady decline in stock market volatility attributed to the overall market factor; that is, the
common volatility shared across returns on different stocks has diminished over that period. The
variation ascribed to firm-specific sources, by contrast, has risen. The implication for investors,
then, is that they need to hold more stocks in their portfolios in order to achieve diversification.

4.2. Stock Market Volatility and Dividends:

Stock market performance is usually measured by the percentage change in the stock price or
index value, that is, the returns, over a set period of time. One commonly used measure of
volatility is the standard deviation of returns, which measures the dispersion of returns from an
average. If the stock market is efficient, then the volatility of stock returns should be related to
the volatility of the variables that affect asset prices. One candidate variable is dividends. But
research conducted in the early 1980s suggests that variation in dividends alone cannot fully
account for the variation in prices (see Le Roy and Porter 1981 and Shiller 1981). Prices are
much more variable than are the changes in future dividends that should be capitalized into

20 | P a g e
prices. Asset prices apparently tend to make long-lived swings away from their fundamental
values. This fact turned out to be equivalent to the finding that, at long horizons, stock returns
displayed predictability. Thus, the literature on excess volatility broached the possibility that the
stock market may not be efficient. In the excess volatility literature, it was seen that the
dividends that are capitalized in the stock price arrive in the future and need to be "discounted"
back to the present using a discount rate (Krainer 2002). In the early research it was assumed
that this discount rate was constant. However, discount rates depend on investors' preferences for
risk, which could very well change over time. Therefore, stock market volatility may not be
excessive if discount rates are variable enough. Thus, the real contribution of the excess volatility
literature was to call attention to the fact that corporate dividends are simply too smooth a series
to account for the high volatility in prices. Subsequent research necessarily focused away from
the payout policy of firms and toward the characteristics of investors and of actual stock market
trading.
4.3. Indexes
In analyzing volatility of security markets of Bangladesh, this report is based on the analysis of
indexes of two security markets of Bangladesh. Rather considering individual stock, the portfolio
(all treaded stocks, Debentures and mutual funds) is considered. Each market calculates two
indexes. DSE use General Price Index and DSE20. CSE use General Price Index and CSE30.
DSE20 represents the top 20 stocks of DSE and CSE30 represents top 30. Both the bourses of
the country introduced SEC prescribed index under weighted average method and excluded ‘Z
Group’ shares from the calculation list since November 2001. Both the indices have replaced the
conventional age-old all share price indices which had been as the benchmark barometer of the
bourses. DSE named the new index as Weighted Average Share Price Index and the base index
has been calculated at 817.62 points while the CSE calls the new index Trade Volume Weighted
Index, which stood at 1836.72 points on the close of first day trading. SEC termed the new move
as an attempt to arrest any bid to bring down or push share prices up by trading a small number
of shares. These security-market indexes have five major specific uses. These are,
i. To examine total returns for an aggregate market or some components of a market over a
specified time period and use the rates of return computed as a benchmark to judge the
performance of individual portfolios.
ii. To develop an index portfolio. Index portfolio led to the creation of index funds to track
the performance of the specified market series (index) over time.
iii. To examine the factors that influence aggregate security price movement by securities
analysts, portfolio managers and others use security-market indexes.
iv. To project future stock price movements, technicians would plot and analyze price and
volume changes for a stock market series.
v. An individual risky asset is its systematic risk, which is the relationship between the rates
of return for a risky asset and the rates of return for a market portfolio of risky asset.
Therefore it is necessary when computing the systematic risk of an individual risky asset

21 | P a g e
 (security) to relate its return to the returns for an aggregate market index that is used as a
proxy for the market portfolio of risky assets.

4.4. Persistence of Stock Market Volatility:

Stock market volatility tends to be persistent; that is, periods of high volatility as well as low
volatility tend to last for months. In particular, periods of high volatility tend to occur when stock
prices are falling and during recessions. Stock market volatility also is positively related to
volatility in economic variables, such as inflation, industrial production, and debt levels in the
corporate sector (see Schwert 1989). The persistence in volatility is not surprising: stock market
volatility should depend on the overall health of the economy, and real economic variables
themselves tend to display persistence. The persistence of stock market return volatility has two
interesting implications. First, volatility is a proxy for investment risk. Persistence in volatility
implies that the risk and return trade-off changes in a predictable way over the business cycle.
Second, the persistence in volatility can be used to predict future economic variables. For
example, Campbell, et al. (2001) show that stock market volatility helps to predict GDP growth.

Volatility as described here refers to the actual current volatility of a financial instrument for a
specified period (for example 30 days or 90 days). It is the volatility of a financial instrument
based on historical prices over the specified period with the last observation the most recent
price. This phrase is used particularly when it is wished to distinguish between the actual current
volatility of an instrument. Actual historical volatility which refers to the volatility of a financial
instrument over a specified period but with the last observation on a date in the past near
synonymous is realized volatility, the square root of the realized variance, in turn calculated
using the sum of squared returns divided by the number of observations. Actual future volatility
which refers to the volatility of a financial instrument over a specified period starting at the
current time and ending at a future date (normally the expiry date of an option)historical implied
volatility which refers to the implied volatility observed from historical prices of the financial
instrument (normally options)current implied volatility which refers to the implied volatility
observed from current prices of the financial instrument future implied volatility which refers to
the implied volatility observed from future prices of the financial instrument

22 | P a g e
 Chapter-5: The Analysis & Interpretation

The study was aimed at representing a comparative analysis of industry wise volatility of stock
price in DSE. The study area was especially in the enlisted companies in the Dhaka Stock
Exchange. From the literature reviewed it is confirm that the industry whose price is more
volatile has an opportunity to capital gain as well as there remain some risk.

The information was selected using the secondary data from the Dhaka Stock Exchange and the
researcher selects all industry which is enlisted in the DSE but the researcher selects only ten
companies of each industry. To observe the price volatility from one industry to another the
researcher takes fifteen year information with half yearly. The tools used to obtain data from the
library in the Dhaka Stock Exchange. Information gathered from the respondents yielded the
focus for the presentation in this chapter. This chapter shall present the trend of price volatility of
each individual company and also represent the industry wish price volatility of each industry
and last of the chapter the researcher presents the overall industry wish price volatility of the
stock price in the Dhaka Stock Exchange.

5.1. Price Volatility of Companies of Each Individual Industry:

An industry is a group of manufacturers or businesses that produce a particular kind of goods or

services. Workers in the textile industry design, fabricate, and sell cloth. The tourist industry
includes all the commercial aspects of tourism. The researcher can use industry to refer to a
group of similar businesses: The automobile industry makes cars and car parts. The food service
industry prepares food and delivers it to hotels, schools, and other big facilities. Industry comes
from the Latin industria, which means "diligence, hard work," and the word is still used with that
meaning. If we build a house in three weeks, when the same job takes everyone else three
months, we are showing impressive industry.

In the Dhaka Stock Exchange about nineteen industries are enlisted. Each industry has some
similar kinds of companies for the objectives of this study the researcher selects ten companies
of each industry. For example in the banking sector the researcher takes ten banks which are
enlisted in DSE. To know the volatility of price from one year to another in each companies of
the specific industry the researcher wants to draw an individual slope of each individual
company. In this section we select all industry and collect information for ten companies and to
analysis of price change of one company to another the researcher draws trend by using MS
excel.

To observe the graph one can easily understand the price volatility of one company to another. If
any company`s price volatility is high then there have a opportunity for speculator to earn capital
gain although there are some volatility risk involved.

23 | P a g e
Banking Sector:
6000 AB Bank A

5000 City Bank A

IFIC Bank A
4000
Uttara Bank A
3000
ICB ISLAMIC BANK LTD Z
2000
First Finance Ltd. B
1000
Premier Leasing Z
0
Bangladesh Industrial Fin. Com. Z
31.12.2015
30.12.2014
30.12.2013
30.12.2012
29/12/2011
30/12/2010
30/12/ 2009
30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Bangladesh Finance and Investment
Co. Ltd. B

Figure 5.1.1: Trend of prices of Individual Companies in Banking Sector

In the banking sector the researcher selects the ten banks which are listed in DSC. Among the
banks the researcher selects four banks A categories three B categorizes and three Z categories.
For the competitive analysis purpose the researcher takes ten years price for half yearly. From
the above graph the researcher sees that the price volatility from 2000 to 2003 is not so volatile
but 2003 to 2011 there is a high volatility is appealable. From the above graph the researcher
sees that Z categories and B categories banks price are highly volatile than A categories.

Investment Sector:

12000 1st ICB M.F. A

10000 2nd ICB M.F. A
8000 3rd ICB M.F. A
6000 4th ICB M.F. A
4000 5th ICB M.F. A
2000 6th ICB M.F. A
0 7th ICB M.F. A
8th ICB M.F. A
Aims 1st M.F. A
Grameen M.F.one A

Figure 5.1.2: Trend of prices of Individual Companies in Investment Sector

In the investment sector all mutual funds in the industries are a category. From the price
volatility graph the researcher sees that 1st, 2nd and 4th ICB mutual fund of investment are more
volatile price level than other mutual funds in investment. There is nearly steady price volatility
in other mutual funds in investment industry. From the graph the researcher sets that from 2006
to 2011 the volatility in price is high than other year.

24 | P a g e
Engineering Industry:

ENGINEERING
8000
7000 Aftab Automobiles A
6000 Aziz Pipes Z
5000
Bangladesh Lamps A
4000
3000 Monno Jute Stafflers Ltd. A
2000 Singer Bangladesh A
1000 BD.Autocars Z
0
Quasem Drycells A

Bd.Thai Aluminium A

Anwar Galvanizing B

Kay & Que Z

Figure 5.1.3: Trend of prices of Individual Companies in Engineering Industry

The engineering sector there are ten companies are available among them the researcher has
selected six A categories company and one B category and three Z category company. From the
graph the researcher observes that the A category company Singer Bangladesh Ltd. price
volatility is high and less volatile company is Anwar Galvanizing company. The rate of volatility
in price is high 2008 to 2011 in engineering sector.

Food & Allied Product:

7000
6000 FOOD & ALLIED PRODUCTS
5000 Olympic Industries A
4000 Apex Foods A
3000 Bangas A
2000 BATBC A
1000 Gemini Sea Food B
0 National Tea Company Limited A
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Zeal Bangla Sugar Z

AMCL (Pran) A
Shaympur Sugar Z
Rahima Food Z

Figure 5.1.4: Trend of prices of Individual Companies in Food & Allied Product

The food and allied product industry the researcher selects ten companies among them six
companies are A categories, one company is B category and three companies are Z categories.
From the graph the researcher sees that National Tea Company Limited in A category is highly
volatile and Rahima Food Company in Z category is less volatility. In the food and allied product
industry the researcher observes that from 2007 to 2011 is more volatile.

25 | P a g e
Fuel & Power Industry:

6000 FUEL & POWER

5000 CVO Petrochemical Refinery

Limited B
4000 Padma Oil Co. A

3000 Eastern Lubricants A

2000 Bd. Welding Electrodes B

1000 Summit Power A

0 Dhaka Electric Supply Copany A

31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Power Grid Company of
Bangladesh Ltd. A
Jamuna Oil Com. Ltd. A
Meghna Petroleum Ltd. A
Titas Gas A

Figure 5.1.5: Trend of prices of Individual Companies in Fuel & Power Industry

The fuel and power industry the price volatility is comparatively high from one year to another.
From ten companies the researcher takes eight A categories company and two B categories and
there are not available in Z categories company. Here the more volatile company is CVO
Petrochemical Fefinery Limited Company which is B Category Company and less volatile
company is Bd.Welding Electrodes. And another A categories company’s volatility rate is more
fluctuates from 2005 to 2011.

Jute Industry:

5000
4000
3000
2000 Sonali Aansh A
1000
Northern Jute A
0
Jute Spinners Z
JUTE

Figure 5.1.6: Trend of prices of Individual Companies in Jute Industry

In the jute industry there are only three companies listed in DSC. These are Sonali Aansh,
Northern Jute and Jute Spinners. Among them two are A categories and one is Z categories.
Those three companies price volatility is more Sonali Aansh which included A category
company. And as like as same price volatility level other A and Z categories company from 2000
to 2015.

26 | P a g e
Textile Industry:

TEXTILE
1800
1600 Modern Dyeing Z
1400
Desh Garmants A
1200
1000 Dulamia Cotton Z
800
Tallu Spinning Z
600
400 Apex Spinning. A
200
0 Mithun Knitting A
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Delta Spinners A
Prime Textile A
Metro Spinning B
Maksons Spinning Mills Limited B

Figure 5.1.7: Trend of prices of Individual Companies in Textile Industry

From the textile industry the researcher has selected the ten companies which include Modern
Dyeing, Desh Garmants ,Dulamia Cotton ,Tallu Spinning, Apex Spinning, Mithun Knitting,
Delta Spinners, Prime Textile, Metro Spinning, Maksons Spinning and Mills Limited all of
these five are A categories and two are B categories and three are Z categories. All of these we
see that Mithun Knitting Company is high volatile and second volatile company is Apex
Spinning these are A category company. The less volatile company is Metro Spinning which is B
Categories Company. From the graph the researcher sees that from 2006 to 2011 the price
volatility is high than other years.

Pharmaceuticals & chemicals Industry:

14000 PHARMACEUTICALS &
12000 CHEMICALS
ACI Limited A
10000
8000 Renata Ltd. A
6000 Reckitt Benckiser(Bd.)Ltd. A
4000
2000 Pharma Aids A
0 The Ibn Sina A
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Wata Chemicals Limited A

Beximco Synthetics Z

Imam Button Z

Figure 5.1.8: Trend of prices of Individual Companies in Pharmaceuticals Industry

The Pharmaceuticals & chemicals Industry`s price volatility is generally high four A categories
companies. These are Renata Ltd. Pharma Aids and The Ibn Sina. From ten companies there are
seven A category company and three B category company. The price fluctuation rate is high
from 2003 to 2011. Generally the Z categories companies are low fluctuation rate.

27 | P a g e
Paper & Printing Industry:

70
60
50
40 PAPER & PRINTING
30
20 Hakkani Pulp & Paper B
10
0 Khulna Printing and Packaging
31.12.2015
30.12.2014
30.12.2013
30.12.2012
29/12/2011
30/12/2010
30/12/ 2009
30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Limited A

Figure 5.1.9: Trend of prices of Individual Companies in Paper & Printing Industry

The Paper and Printing industry has only two companies are listed in DSC. These are Hakkani
Pulp & paper and Khulna Printing and Packaging Limited. The Khulna Printing and Packaging
Limited company `s fluctuation rate is more than Hakkani Pulp & paper limited company. The
fluctuation rate of A category company is high in 2010.

Service & Real Estate Industry:

3000 SERVICES & REAL ESTATE

2500
Samorita Hospital A
2000
1500 Eastern Housing A

1000 Delta Brac Housing

500 Fin.Corp.Ltd. A
Summit Alliance Port Limited A
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

National Housing Finance and

Investments Limited A
SAIF Powertec Limited A

Figure 5.1.10: Trend of prices of Individual Companies in Real Estate Industry

In the Dhaka Stock Exchange there are six companies are enlisted in the service and real estate
industry. These are Samorita Hospital, Eastern Housing, Delta Brac Housing Fin.Corp.Ltd,
Summit Alliance Port Limited, National Housing Finance and Investments Limited and SAIF
Powertec Limited. All of these are A category company.

28 | P a g e
Cement Industry:

4000 Cement
3500
3000 Heidelberg Cement Bd. A
2500
2000 Confidence Cement A
1500
Meghna Cement A
1000
500 Aramit Cement A
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012
29/12/2011
30/12/2010
30/12/ 2009
30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Lafarge Surma Cement A

M.I. Cement A

Premier Cement Mills Limited A

Figure 5.1.11: Trend of prices of Individual Companies in Cement Industry

There are seven companies in the cement industry are enlisted in DSC. All of these are A
categories company. In the cement industry the price fluctuation rate from one company to other
company is high. From the graph the researcher sees that the fluctuation rate of Heidelberg
Cement Bd. is higher than other company in the industry. But the price volatility of Premium
Cement Mills Limited is lower than other company. The researcher see that the overall price
volatility is existing from 2000 to 2011 in the cement industry.

29 | P a g e
Information Technology Sector:

70
IT - Sector
60
50 Information Services Network Z
40
30 BDCOM Online Ltd. A
20
Intech Online Ltd. A
10
0 Agni Systems Ltd. A
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Daffodil Computers Z

aamra technologies limited A

Figure 5.1.12: Trend of prices of Individual Companies in IT Sector

In the information and technological industry there are six companies are enlisted in DSC. From
the IT sector four companies are A categories and two companies are B categories. From the
graph the researcher sees that the overall scenario of individual companies is almost same from
2000 to 2015. From the graph the researcher sees that Agni System limited price volatility is
high than other company.

Tannery Industry:

4500
4000 Tannery Industries
3500
3000 Apex Tannery A
2500
2000
1500 Bata Shoe A
1000
500 Apex Footwear Limited A
0
30.12.2014
31.12.2015

30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Samata Leather Z

Legacy Footwear B

Figure 5.1.13: Trend of prices of Individual Companies in Tannery Industry

In the Tannery industry only five companies are enlisted in DSC. All of these three companies
are A categories one B and one Z categories company are available in the tannery industry. From
the graph the researcher sees that the A category company’s price volatility is high than B and Z
categories. The Apex Forward Limited has high price volatility from 2006 to 2011.Generally
steady price volatility are shown in Samanta Leather which are Z category company.

30 | P a g e
Ceramic Industry:

1200
1000 Ceramic Industry
800
600
Monno Ceramic B
400
200
Standard Ceramic A
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Fu-Wang Ceramic A

Figure 5.1.14: Trend of prices of Individual Companies in Ceramic Industry

The ceramic industry there is five companies enlisted in DSC. These are Monno Ceramic,
Standard Ceramic, Fu-Wang Ceramic, Shinepukur Ceramics Limited and RAK Ceramics
(Bangladesh) Ltd. All of these three companies are A categories one B and one X category
company. From the graph the researcher sees that the Monno Ceramic’s price volatility is higher
than other. But Shinepukur Ceramics Limited and RAK Ceramic’s price volatility is lower than
other company.

Insurance:
Insurance
45000
40000 Delta Life Insurance A
35000 Pragati Insurance A
30000
Sandhani Life Insurance A
25000
20000 Progressive Life Z
15000 Asia Pacific Gen Ins A
10000
5000 Sonar Bangla Insurance A
0 Pragati Life Insurance Z

Prime Islami life Insurance

A
Padma Islami Life
Insurance Limited Z
Sunlife Insurance Company
Limited B

Figure 5.1.15: Trend of prices of Individual Companies in Insurance Industry

In the insurance industry the researcher has selected ten insurance companies all of which six are
A categories company and one is B Categories Company and three are Z Categories Company.
From the graph the researcher sees that the price volatility of Delta Life Insurance is higher than
other insurance companies. Other company’s price volatility is not so much fluctuating like as

31 | P a g e
Delta Life Insurance. The price fluctuation rate is high over 2006 to 2011 in the insurance
company.

Corporate Bond:

1600
1400
1200 CORPORATE BOND
1000
800
600 IBBL Mudaraba Perpetual
400 Bond A
200
0 ACI 20% Convertible Zero
Coupon Bonds
30.12.2013
31.12.2015
30.12.2014

30.12.2012
29/12/2011
30/12/2010
30/12/ 2009
30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Sub 25% Convertible Bonds
of Brac Bank Ltd. A

Figure 5.1.16: Trend of prices of Individual Companies in Corporate Bond Industry

In the corporate bond there are three company’s bonds are enlisted in DSC these are IBBL
Mudaraba Perpetual Bond, ACI 20% Convertible Zero Coupon Bond, Sub 25% Convertible
Bond of Brac Bank Limited. All of these two companies bonds are A category. The fluctuation
rate over the time of these bonds is nearly correlated. The IBBL Mudaraba Perpetual Bond’s
fluctuation rate is somewhat higher than other corporate bond.

Telecommunication Industry:

400
350
300
250 TELECOMMUNICATION
200
150
100 Grameenphone Ltd. A
50
0 Bangladesh Submarine Cable
Company Limited A

Figure 5.1.17: Trend of prices of Individual Companies in Telecommunication Industry

The Telecommunication industry only two companies are enlisted in DSC. These are
Grameenphone Limited and Bangladesh Submarine Cable Company Limited. All of these are A
categories company. From the graph the researcher sees that the grammenphone limited price
trend are increasing from 2009 to 2014 but 2015 the price volume are downward sloping.

32 | P a g e
Bangladesh Submarine Cable Company price trend are upward slop from 2011 to 2012 but from
2012 to 2015 the price trend are downward slop.

Travel & Leisure Industry:

800
700 Travel and Leisure
600
500 United Airways (BD) Ltd. A
400
300 Bangladesh Services* Z
200
100 Unique Hotel & Resorts Limited
0 A
The Peninsula Chittagong Ltd. A

Figure 5.1.18: Trend of prices of Individual Companies in Travel & Leisure Industry

In the Dhaka Stock Exchange four companies are enlisted in the travel and leisure industry.
These are United Airways (BD) Ltd, Bangladesh Services, Unique Hotel & Resorts Limited and
The Peninsula Chittagong Ltd. All of these three companies are A categories and one is Z
category. From the graph the researcher sees that United Airways (BD) Limited’s price volatility
is higher than other company. This company’s price sharply downward 2010 to 2011. But other
company’s price volatility is somewhat steady state.

Miscellaneous:

6000 Aramit A

5000 BSC A

GQ Ball Pen A
4000
Usmania Glass A
3000
Savar Refractories Z
2000
BEXIMCO A

1000 Sinobangla Industries A

0 Miracle Ind. B

Berger Paints A

Khan Brothers PP Woven Bag

Industries Limited A

Figure 5.1.19: Trend of prices of Individual Companies in Miscellaneous

33 | P a g e
From the miscellaneous industry the researcher has selected ten companies from various sectors.
All of these eight are A categories companies and one is B category and one is Z category. From
the graph the researcher observes that BSC and Usmania Glass company are highly volatile than
other company. The lower price volatile company is Berger Paint which is A categories
company.

5.2. Industry -Wise Price Volatility from One Industry to Another:

To draw the price trend of each industry is a so difficult task and so time consuming also. If the
researcher would take more samples then the result would show more accurate. In this section to
know the price volatility in each industry from one year to another year we select ten companies
of each industry and the researcher collects fifteen years information that is 2000 to 2015 with
half yearly basis. To draw the price trend in each industry the researcher averages the yearly
wish price in each year and using the MS excel the researcher wants to draw the price trend of
each industry.

The industry whose price is more volatile than other industry then this industry is more risky
although the speculator has more chance for capital gain. From the following graph the
researcher wants to identify which industry`s price is more volatile and which industry`s price is
a steady state in nature and in the end the researcher wants to interpret the reason for the
volatility of stock price. The investor who wants to earn dividend gain he/she makes investment
in the industry whose price is not so volatile and wants to long term investment. And the investor
who wants to earn capital gain prefers the more volatile industry.

The Banking Sector:

The Banking Sector

1400
1200
1000
800
Price

600
400
200 Avarage Banking Sector
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Figure 5.2.1: The price Trend in the Banking Sector

In the banking sector the researcher has selected ten banks and then the researcher averages the
price rate, from the trend the researcher sees that from 2000 to 2016 the price volatility of
banking industry is more volatile from 2006 to 2010.And the price is high in 2007. So the

34 | P a g e
researcher can say that the overall banking sector the price is more volatile from 2000 to 2011
and the steady price are available from 2011 to 2016.

The Investment Sector:

The Investment Sector

3000
2500
2000
price

1500
1000
500 Avarage Total Investment
0 Sector
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Figure 5.2.2: The price trend in the Investment Sector

In the investment or mutual fund sector the researcher has selected ten mutual funds and all of
them the researcher averages the price rate. From the graph the researcher sees that the price rate
is high in the year 2010 and lowest price in the year 2013.The price fluctuation rate in the
investment sector are comparatively more volatile from 2006 to 2011.And a steady rate available
from 2000 to 2006 and 2011 to 2015.

The Engineering Sector:

The Engineering Sector

1800
1600
1400
1200
Price

1000
800
600
400 Avarage Total Engineering
200 Sector
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Figure 5.2.3: The price trend in Engineering Sector

35 | P a g e
From the total engineering sector the highest price are available in 2010 and lowest rate in 2012.
The price is more volatile in the engineering sector from 2007 to 2010. The price is
comparatively steady from 2000 to 2007 and 2011 to 2015. So the overall price fluctuation in
this sector is volatile.

The Food & Allied Product Industry:

The Food and Allied Products

2000
1500
Price

1000
500 Avarage Total Food and Allied
0 Products
30/12/ 2009
31.12.2015
30.12.2014
30.12.2013
30.12.2012
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
Figure 5.2.4: The price trend in the Food & Allied Product Industry 31/12/2000

In the food and allied product industry the price volatility from one year to another year is more
volatile than other industry. From the graph the researcher sees that the price rate is high in the
2010 and the lowest rate in the 2011. The allied product sector the price is more volatile from
2008 to 2010 and a steady position from 2000 to 2007 and 2011 tom 2015.

The Fuel & power Industry:

The Fuel & Power industry

1400
1200
1000
Price

800
600
400 Avarage Total Fuel & Power
200 industry
0
30.12.2012
31.12.2015
30.12.2014
30.12.2013

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Figure 5.2.5: The price trend in the Fuel & power Industry

36 | P a g e
The fuel and power industry the researcher has selected ten companies which are enlisted in the
DSE and then the researcher averages the price from 2000 to 2015. From the graph the
researcher sees that the highest price rate in the year 2010 and lowest rate are 2001. The
fluctuation rate is high from 2006 to 2011 and low price available in 2000 to 2006 and 2011 to
2015.

The Jute Industry:

Total Jute Industry

3000
2500
2000
price

1500
1000
Avarage Total Jute Industry
500
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012
29/12/2011
30/12/2010
30/12/ 2009
30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Figure 5.2.6: The price trend in the Jute Industry

The jute industry the researcher selects all companies which are enlisted in the DSE and then the
researcher averages the price from 2000 to 2015. From the graph the researcher sees that the
highest price rate in the year 2010 and lowest rate are 2011. The fluctuation rate is high from
2008 to 2011 and low price available in 2000 to 2006 and 2011 to 2015.

The Textile Industry:

The Textile Industry

800
700
600
500
Price

400
300
200
100 Avarage Textile Industry
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012
29/12/2011
30/12/2010
30/12/ 2009
30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

37 | P a g e
 Figure 5.2.7: The price trend in the Textile Industry

In the textile industry the researcher has selected ten companies and all of them the researcher
averages the price rate. From the graph the researcher sees that the price rate is high in the year
2010 and lowest price in the year 2012.The price fluctuation rate in the investment sector are
comparatively more volatile from 2007 to 2011.And a steady rate available from 2000 to 2007
and 2011 to 2015.

The Pharmaceutical Industry:

The Pharmaceutical Industry

2500
2000
1500
Price

1000
500 Avarage Pharmaceutical
0 Industry
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Figure 5.2.8: The price trend in the Pharmaceutical Industry

In the pharmaceutical industry the researcher has selected ten companies and then the researcher
averages the price rate, from the trend the researcher sees that from 2000 to 2015 the price
volatility of pharmaceutical industry is more volatile from 2006 to 2010.And the price is high in
2010. So, the researcher can say that the overall pharmaceutical industry the steady price is
available from 2000 to 2006 and from 2011 to 2015.

The Paper & Printing Industry:

The Paper & Printing Industry

50
40
30
Price

20
10 Avarage Total Paper & Printing
0 Industry
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

38 | P a g e
 Figure 5.2.9: The price trend in the Paper & Printing Industry

In the paper and printing industry the researcher has selected ten companies and all of them the
researcher averages the price rate. From the graph the researcher sees that the price from one
year to another year is so much fluctuating in the paper and printing industry. The graph the
researcher sees the highest price in the year 2014 and lowest price in the year 2004.In this
industry the price volatility is higher than other and higher fluctuation rate from 2008 to 2011
and a steady price rate from 2000 to 2007.

The price trend in the Real Estate Industry:

The Real Estate Industry

1400
1200
1000
800
Price

600
400 Avarge Total Real Estate
200 Industry
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012
29/12/2011
30/12/2010
30/12/ 2009
30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Figure 5.2.10: The price trend in the Real Estate Industry

In the real estate industry the researcher has selected all companies which are enlisted in the DSE
and then the researcher averages the price rate, from the trend we see that from 2007 the price is
increasing and the pick position in the year 2010 and from them the price is decreasing .The real
estate industry the steady price rate from 2000 to 2007 and from 2012 to 2015.

39 | P a g e
The Cement Industry:

The Cement Industry

1400
1200
1000
price

800
600
400
200 Avarage Cement Industry
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Figure 5.2.11: The price trend in the Cement Industry

The real cement industry the researcher has selected all companies which are enlisted in the DSE
and then the researcher averages the price rate, from the trend the researcher sees that from 2008
the price is increasing and the pick position in the year 2009 and from them the price is
decreasing .The real estate industry the steady price rate from 2000 to 2008 and from 2011 to
2015.

The Information & Technology Sector:

Total IT Sector
50
40
30
Price

20
10 Avarage Total IT Sector
0

Figure 5.2.12: The price trend in the Information & Technology Sector

In the information and technology sector the researcher has selected all companies which are
enlisted in the DES and all of them the researcher averages the price rate. From the graph the
researcher sees that the price from one year to another year is so much fluctuating in the
information and technology sector. The graph the researcher sees the highest price in the year
2009 and lowest price in the year 2001.In this industry the price volatility is higher than other
and higher fluctuation rate from 2007 to 2011.
40 | P a g e
The Tannery Industry:

The Tannery Industry

1500
1000
Price

500
0 Avarage Total Tannery Industry
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Figure 5.2.13: The price trend in the Tannery Industry

The tannery industry the researcher has selected all companies which are enlisted in DSE and all
of them the researcher averages the price rate. From the graph the researcher sees that the price
from one year to another year is so much fluctuating in the tannery industry. The graph the
researcher sees the highest price in the year 2010 and lowest price in the year 2000.In this
industry the price volatility is higher than other and higher fluctuation rate from 2006 to 2011
and a steady price rate from 2000 to 2006 and from 2011 to 2015.

The Ceramic Industry:

The Ceramic Industry

600
500
400
Price

300
200
100 Avarage Total Ceramic Industry
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Figure 5.2.14: The price trend in the Ceramic Industry

In the ceramic industry the researcher has selected all companies and all of them the researcher
averages the price rate. From the graph the researcher sees that the price rate is high in the year
2010 and steady price from 2011 to 2015.The price fluctuation rate in the ceramic industry are
comparatively less volatile from 2000 to 2008. From 2008 the price is increasing and the pick
price in the year 2010.From 2010 the price is decreasing.

41 | P a g e
The Insurance Sector:

The Insurance Sector

6000
5000
4000
Price

3000
2000
1000 Avarage Insurance Sector
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Figure 5.2.15: The price trend in the Insurance Sector

The insurance industry the researcher has selected all companies which are enlisted in the DSE
and then the researcher averages the price rate, from the trend the researcher sees that from 2007
the price is increasing after 2007 the price is decreasing slightly and the pick position in the year
2010 and from them the price is decreasing .The insurance industry the steady price rate from
2000 to 2006 and from 2013 to 2015.

The Corporate Bond Industry:

The Corporate Bonds

1200
1000
800
Price

600
400
200 Avarage Total Corporate Bonds
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Figure 5.2.16: The price trend in the Corporate Bond Industry

In the corporate bond industry the researcher has selected all the companies which are enlisted in
DSE and the corporate bond industry enlisted from 2007 and the researcher takes the data from
2007 to 2015. From the graph the researcher sees that the price rate fluctuation from one year to
another year is not so volatile.

42 | P a g e
The Telecommunication Industry:

The Telecommuication Industry

300
250
200
Price

150
100
Avarage Total Telecommuication
50
Industry
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Figure 5.2.17: The price trend in the Telecommunication Industry

In the telecommunication industry the researcher has selected all the companies which are
enlisted in DSE and the telecommunication industry enlisted from 2009 and the researcher takes
the data from 2009 to 2015. From the graph the researcher sees that the price rate fluctuation
from one year to another year is slightly volatile. And the highest price is 2014 and lowest rate in
2011.

The Travel & Leisure Industry:

The Travel & Laisure Industry

200

150
Price

100

50 Avarage Total Travel & Laisure

Industry
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Figure 5.2.18: The price trend in the Travel & Leisure Industry

The travel and leisure industry enlisted from 2010 and the researcher has taken the data from
2010 to 2015. This industry the starting year price is high and then the price is decreasing from
2010 to 2011. And from 2012 to 2015 the price fluctuation rate is not so volatile that is steady
state.

43 | P a g e
The Miscellaneous Industry:

The Miscellaneous Industry

1200
1000
800
Price

600
400
Avarage Miscellaneous Industry
200
0
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Figure 5.2.19: The price trend in the Miscellaneous Industry

In the miscellaneous industry various companies are enlisted in the DSE. From them the
researcher has selected only ten companies and then the researcher averages the price from one
year to another in each company from 2000 to 2015 in the half yearly. From the graph the
researcher sees that the price from one year to another year is so much fluctuating in the
miscellaneous industry. The graph the researcher sees the highest price in the year 2009 and
lowest price in the year 2001.In this industry the price volatility is higher than other and higher
fluctuation rate from 2007 to 2011.

5.3. A Comparison of Industry -Wise Volatility of Stock Prices in DSE:

The industry wises price volatility from one industry to another industry has a significant effect
to shareholders, investors, stockholders, creditors and overall stakeholders. The short term
investors want to invest the industry whose price is more volatile and earn capital gain. The long
term investors and rational investors want to invest the industry whose price is less volatile and
earn dividend gain. The following graphs show the industry wish price volatility and one can
easily select the industry whose price more volatile and whose price is less volatile and which
industry is more preferable for his/her.

Each graph shows five industries and each industry’s price volatility trend. The investors can
easily understand the trend of prices from one year to another year. If prices of one year to
another year is more volatile than the industry is more risky for rational investors.

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A Comparison of Industry Wise Volatility of Stock Prices in DSE:

3000
2500
2000
1500 Avarage Banking Sector
1000 Avarage Engineering Sector
500 Avarage Food & Allied Product
0 Avarage Fuel & power Industry
31.12.2015
30.12.2014
30.12.2013
30.12.2012
29/12/2011
30/12/2010
30/12/ 2009
30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Avarage Jute industry

Graph 5.3.1: Comparison of Industry Wise Stock Prices Volatility

In the above graph the researcher sees five industries which are banking sectors, engineering
sector, food and allied product industry, fuel and power industry and jute industry. All of them
the jute industry`s price is more volatile and less volatile industry is fuel and power industry. The
engineering sector`s price volatility is medium all of them. So the rational investor should select
the fuel and power industry.

A Comparison of Industry Wise Volatility of Stock Prices in DSE:

2500
2000 Avarage Textile industry

1500 Avarage Pharmaceutical Industry

1000
Avarage Paper & printing Industry
500
Avarge Service & Real Estate
0 Industry
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Avarage Cement Industry

Graph 5.3.2: Comparison of Industry Wise Stock Prices Volatility

From the above graph the researcher sees that there are five industries that are textile industry,
pharmaceutical industry, paper and printing industry, service & real estate industry and cement
industry. All of them the pharmaceutical industry`s price volatility is more than other. The less
volatile industry is paper and printing industry. Cement industry, service & real estate industry`s
price volatility are somewhat steady state.

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A Comparison of Industry Wise Volatility of Stock Prices in DSE:

6000
5000
4000
Avarage IT Sector
3000
Avarage Tannery Industry
2000
Avarage Ceramic Industry
1000
0 Avarage Insurance Industry
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000
Avarage Total Corporate Bond

Graph 5.3.3: Comparison of Industry Wise Stock Prices Volatility

In the above graph the researcher sees five industries which are IT sector, tannery industry,
ceramic industry, insurance industry, and corporate bond industry. All of them the insurance
industry`s price is more volatile and less volatile industry is IT sector. The tannery industry,
ceramic industry, and corporate bond industry`s price volatility is medium all of them. So the
rational investor should select the information technology sector although the insurance industry
has more opportunity for capital gain.

A Comparison of Industry Wise Volatility of Stock Prices in DSE:

1200
1000
800 Avarage Telecommunication
600 Industry
400
Avarage Travel & Leisure
200 Industry
0
Avarage Miscellaneous Industry
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Graph 5.3.4: Comparison of Industry Wise Stock Prices Volatility

From the above graph the researcher sees that there are three industries that are
telecommunication industry, travel and leisure industry and miscellaneous industry. All of them
miscellaneous industry `s price volatility is more than other. The less volatile industry is travel
and leisure industry although telecommunication industry, travel and leisure industry started their
business in 2009 and 2010.

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5.4. An Overall Comparison of Industry Wise Volatility of Stock Price:

Avarage Banking Sector

Industry Wish Price Volatility
Avarage Investment Sector
6000
Avarage Engineering Sector

Avarage Food & Allied Product

5000
Avarage Fuel & power Industry

Avarage Jute industry

4000 Avarage Textile industry

Avarage Pharmaceutical Industry

Price

3000 Avarage Paper & printing Industry

Avarge Service & Real Estate

Industry
Avarage Cement Industry
2000
Avarage IT Sector

Avarage Ceramic Industry

1000
Avarage Insurance Industry

Avarage Total Corporate Bond

0 Avarage Telecommunication
31.12.2015
30.12.2014
30.12.2013
30.12.2012

30/12/ 2009
29/12/2011
30/12/2010

30/12/2008
30/12/2007
28/12/2006
29/12/2005
30/12/2004
30/12/2003
30/12/2002
30/12/2001
31/12/2000

Industry
Avarage Travel & Leisure Industry

Avarage Miscellaneous Industry

Graph 5.4.1: Trend of overall industry wise price volatility

From the following graph, eighteen industries are available which are enlisted in Dhaka Stock
Exchange. For the specific objective the researcher wants to compare the overall industry wise
price volatility. The graph shows the overall price volatility from 2000 to 2015. From the graph
the researcher sees that the insurance industry`s price is more volatile than other industry. So the
rational and long term investors do not want to invest this sector since the price volatility in the
insurance industry is more volatile than other industry. The short term investors and speculators
want to invest such volatile investment sector since there is more possibility to earn capital gain
than dividend gain. After the insurance industry the pharmaceutical industry is more volatile than
the jute industry and engineering sector are more volatile. From the overall observation the
researcher sees that from 2000 to 2011 the overall industries face more price fluctuation than
other years. The travel and leisure, telecommunication, ceramic and total corporate bond
industries `price volatility is steady somewhat state and the rational and long term investor

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prefers to invest in such industry since this industry price volatility is not so high and there is a
possibility of dividend gain rather than capital gain. The medium volatile industries enlisted in
DSE are tannery, cement, miscellaneous, banking sector, paper and printing industry.

Analysis conducted on the basis of information gathered from the secondary data which are
collected from the DSE library. In this chapter the interpretation of the study also represented.
General interpretation of the study is that the industry whose price is highly volatile there is a
chance of capital gain although a risk is involved in the highly fluctuated industry. The short
term investors and the speculators want to invest in the highly fluctuated industry. On the other
hand the industry whose price is not so much highly volatile from one year to another year such
kind of industry is preferable for the rational and long term investors for achieving the dividend
gain.

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 Chapter-6: Findings, Summary Recommendations
And Conclusion

The study was aimed at find out a comparative study of industry wise price volatility of the stock
price in the DSE. The literature on stock price volatility and how it operates was reviewed. In the
Dhaka Stock Exchange about nineteen industries are enlisted. Each industry have some similar
kinds of companies for the objectives of studies the researcher has selected ten companies of
each industry. For example in the banking sector the researcher has taken ten banks which are
enlisted in DSE. To know the volatility of price from one year to another in each companies of
the specific industry the researcher wants to draw an individual slope of each individual
company. The study area was only the Dhaka Stock Exchange .This chapter contains findings,
summary recommendations and conclusions.

6.1. Findings of the Survey:

i. The insurance industry whose price is more volatile than other this industry has a
chance of capital gain. This figure is shown in the figure no. 5.2.15.

ii. The telecommunication industry is less price volatile industry has an effect of rational
and long term investors to dividend gain rather than capital gain. This figure is shown
in the figure number 5.2.17.

iii. From the overall comparison of industry wise-price volatility the researcher has
observed that the insurance industry`s price is more volatile than other industry.

iv. So, the rational and long term investors do not want to invest the insurance sector
since the price volatility in the insurance industry is more volatile than other industry.

v. The short term investors and speculators want to invest such volatile investment
sector like insurance sector since there is more possibility to earn capital gain than
dividend gain.

vi. After the insurance industry the pharmaceutical industry is more volatile than the jute
industry and engineering sector are more volatile.

vii. From the overall observation we see that from 2000 to 2011 the overall industries
face more price fluctuation than other years.

viii. The travel and leisure, telecommunication, ceramic and total corporate bond
industries `price volatility is steady somewhat state and the rational and long term

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 investor prefers to invest in such industry since this industry price volatility is not so
high and there is a possibility of dividend gain rather than capital gain.

ix. The medium volatile industries enlisted in DSE are tannery, cement, miscellaneous,
banking sector, paper and printing industry.

x. In the banking sector the price volatility from 2000 to 2003 is not so volatile but 2003
to 2011 there is a high volatility is appealable. From the graph we see that Z
categories and B categories banks price are highly volatile than A categories. .
(Figure-5.1.1);
xi. In the investment sector there is nearly steady price volatility in other mutual funds in
investment industry. From the graph we sets that from 2006 to 2011 the volatility in
price is high than other year (Figure-5.1.2);
xii. From the insurance sector the graph we see that the price volatility of Delta Life
Insurance is higher than other insurance companies. Other company’s price volatility
is not so much fluctuating like as Delta Life Insurance. The price fluctuation rate is
high over 2006 to 2011 in the insurance company. (Figure-5.1.15);
xiii. All of them the jute industry`s price is more volatile and less volatile industry is fuel
and power industry. The engineering sector`s price volatility is medium all of them.
So the rational investor should select the fuel and power industry. (Figure-5.3.1);
xiv. All of them the pharmaceutical industry`s price volatility is more than other. The less
volatile industry is paper and printing industry. Cement industry, service & real estate
industry`s price volatility are somewhat steady state. (Figure-5.3.2);
xv. All of them the insurance industry`s price is more volatile and less volatile industry is
IT sector. The tannery industry, ceramic industry, and corporate bond industry`s price
volatility is medium all of them. So the rational investor should select the information
technology sector although the insurance industry has more opportunity for capital
gain. (Figure-5.3.3);
xvi. From the graph we see that there are three industries that are telecommunication
industry, travel and leisure industry and miscellaneous industry. All of them
miscellaneous industry `s price volatility is more than other. The less volatile industry
is travel and leisure industry although telecommunication industry, travel and leisure
industry started their business in 2009 and 2010. (Figure-5.3.4);

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6.2. Summary Recommendations:

To reduce the volatility and to help the investors taking good investment decisions the following
points may be considered:
i. To reduce the high volatility of insurance industry accounts of listed company should be
audited by renowned audit firm and to ensure whether the information are sufficiently
disclose.
ii. Most important one is awareness. To make investors aware and knowledgeable SEC and
Govt. should take awareness programme which is also an objective of SEC.
iii. Making relevant information available, relating to specific securities SEC should monitor
strongly the quality of audited reports, which requires transparency and accountability of
audit firms in topmost
iv. The decisions taken by the regulatory authority should be made as much as predictable
with providing adequate explanation for the investors. Again, before taking any major
regulatory decisions a broad-based consultation among widely representative advisory
committees, deliberations with the stock exchanges and intermediary associations,
chambers of commerce and investor associations and the public which helped drive
market consensus for the reforms could be considered by the SEC
v. SEC along with the government should take steps to increase the number of mutual fund
to stabilize the market in the long run, which can be done by enforcing a level playing
regulatory measure for public and private mutual funds.
vi. To bring more companies which have good track record in terms of financial
performance tax gap between listed and non-listed companies could be made in such a
way that they are encouraged to enlist in the market. For this purpose, for different
sectors different margins can be considered as well.
vii. Government can also take pro-active role in building a stable market through tapping the
growing interest of general people in the market by increasing supply of shares
viii. Public utilities and infrastructure related projects can also be asked to raise a part of debt
through issue of marketable bonds.
ix. Spread of capital market educational programmer up to root level needs to be
strengthened, as to protect the interest of new investors minimum level of knowledge on
capital market is very important

To guide and restore the confidence of individual investor in capital market, the regulatory
authority should take necessary actions to encourage corporate governance rating among listed
companies, which will enable investors to differentiate the good governance companies from the
rest and can then attach higher value to those firms as well. And, without improving the
governance of the market and eliminating scope of manipulation, it will be difficult to attract
good scripts at the desired level. In this endeavor, regulators must adapt continuously to the
changes in the economy and the pressures of globalization.

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6.3. Conclusion:

From the overall analysis, eighteen industries are available which are enlisted in Dhaka Stock
Exchange. For the specific objective the researcher wants to compare the overall industry wise
price volatility. The graph shows the overall price volatility from 2000 to 2015. From the graph
the researcher sees that the insurance industry`s price is more volatile than other industry. So the
rational and long term investors do not want to invest this sector since the price volatility in the
insurance industry is more volatile than other industry. The short term investors and speculators
want to invest such volatile investment sector since there is more possibility to earn capital gain
than dividend gain. After the insurance industry the pharmaceutical industry is more volatile than
the jute industry and engineering sector are more volatile. From the overall observation the
researcher sees that from 2000 to 2011 the overall industries face more price fluctuation than
other years. The travel and leisure, telecommunication, ceramic and total corporate bond
industries `price volatility is steady somewhat state and the rational and long term investor
prefers to invest in such industry since this industry price volatility is not so high and there is a
possibility of dividend gain rather than capital gain. The medium volatile industries enlisted in
DSE are tannery, cement, miscellaneous, banking sector, paper and printing industry.

So, from the following analysis the researcher can say that insurance industry, the
pharmaceutical industry, the jute industry and engineering sector are more volatile and less
volatile industries are the travel and leisure, telecommunication, ceramic and total corporate
bond industries and the medium volatile industries are tannery, cement, miscellaneous, banking
sector, service and real estate, paper and printing industry.

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