Bangladesh Stock Market Growing? Key Indicators Based Assessment

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BANGLADESH STOCK MARKET GROWING? KEY INDICATORS BASED ASSESSMENT

M Khokan Bepari
Assistant Professor
Department of Cooperation and Marketing
Faculty of Agricultural Economics & Rural Sociology
Bangladesh Agricultural University, Mymensingh-2202, Bangladesh Phone: +88 01716601759 khokan552@yahoo.com Dr. Abu Mollik
Senior Lecturer and Finance Discipline Leader
School of Commerce and Marketing
Division of Business and Informatics
Central Queensland University abumollik@yahoo.com.au

Abstract

This paper focuses on the growth of Bangladesh stock market over time. The market trends in terms of market capitalization, market liquidity, market concentration, number of listings, volatility in the market index and foreign portfolio investment were considered. The study finds that key indicators are significantly correlated. Stock market growth index is constructed considering market capitalization ratio; turn over ratio, value traded to GDP ratio and volatility in market index. The findings of the study suggest that although Bangladesh stock market is growing over time, the growth has not yet assumed any stable and obvious trend. We conclude that Bangladesh stock market is still at an early stage of its growth path with a small market size relative to GDP and is characterized by poor liquidity and high market concentration.

Introduction

Demirguc-Kunt and Levine (1996), Singh (1997) and Levine and Zervos (1998) find that stock market growth plays an important role in predicating future economic growth in situations where the stock markets are active. The arguments of Demirguc-Kunt et al. (1996) indicate that economies without well-functioning stock markets may suffer from three types of imperfections: first, opportunities for risk diversification are limited for investors and entrepreneurs, second, firms are unable to optimally structure…...

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