Other Importance of Stock Market in Bangladesh One of the most burning questions today is what the use of the capital market is and why the government should get involved to stabilize the market. Why should we care about the prospect of the market, if it does not contribute to our economy? Apparently, it seems that stock market does not keep any connection with the economy. But this market offers a great opportunity for the whole economy if we can grab it properly:
It works towards an effective, efficient and transparent market of international standard to serve and invest in Bangladesh in order to facilitate the competent entrepreneurs to raise capital and accelerate industrial growth for overall benefit of the economy and keep pace with the global advancements.
Importance of Stock Market in Bangladesh One of the most burning questions today is what the use of the capital market is and why the government should get involved to stabilize the market. Why should we care about the prospect of the market, if it does not contribute to our economy?
Apparently, it seems that stock market does not keep any connection with the economy.
But this market offers a great opportunity for the whole economy if we can grab it properly: Firstly, the companies can arrange their long term capital for business expansion from market with a minimum cost. The banks are suitable only for short term and mid term financing.
Secondly, the companies listed in the stock market come under regulation of Securities and Exchange Commission, which ensures the corporate governance of the companies. The financial statement of listed companies is quite informative and valuable than unlisted companies.
Thirdly, the most important factor is that stock market can attract investment. People reduce their consumption and invest here to earn better in future. Fourthly, stock market can finance huge fund for large projects easily. Finally, stock market is considered as the barometer of economy.
An efficient stock market is the leading indicator of the economy. Therefore, the overall performance of Macroeconomic condition of a firm in terms of its contribution to the market portfolio return, in turn, can be evaluated based on some macro variables like GDP growth, inflation, etc.
As far as a risk adverse investor is concerned, uncertainty is the most important factor in pricing any financial asset. According to most asset pricing theories, uncertainty or risk is determined by the covariance between asset return and the market portfolio.
Although it has been recognized for quite some time that the uncertainty of speculative prices, as measured by the variances and covariance, is changing through time, it was not until recently that financial economists have started explicitly modeling time variation in second- or higher order moments.
Their paper showed how predicted macroeconomic volatility is related to the predicted stock market volatility in Bangladesh. It was also found that industrial production volatility Granger-causes stock market volatility and stock market volatility Granger-causes inflation uncertainty volatility.
The dearth of qualified analysts and institutional investors is a well-known fact in the emerging markets like the one in Bangladesh.
In FY, the rate of market capitalization was 4. After this period, the rate of market capitalization increased at a smooth rate and in FY ; the market capitalization ratio reached at But after that year, market capitalization ratio doubled than that of the previous year and reached at GDP and market capitalization have not displayed any significant correlation Figure 2.
That is, the size of market capitalization has not shown any relationship with GDP. The percentage change in GDP at current price has a smooth shape while the percentage change in market capitalization has shown an erratic trend.
In FYthe percentage change of market capitalization was Again in FYthe percentage change of market capitalization was And finally in FYthe percentage change of market capitalization is 2.
Market Capitalization and Investment Ratio From FY to FYthe market capitalization and investment ratio has stayed between 10 to 35 percent.Influences of Stock Market on Real Economy: A Case Study of Bangladesh 51 THE OBJECTIVE OF THE STUDY The linkage between stock market and economic growth has occupied a central position in the development literature (see Samuel, ; Demirguc-Kunt and Levine, ; Akinifesi, ; Levine and Zervos, ).
The Role of Financial Market and Institution in the Economic Development of Bangladesh - Download as Word Doc .doc), PDF File .pdf), Text File .txt) or read online/5(3).
The econometric results of the study by employing the regression analysis showed that Pakistan stock markets contribute to the economic growth in terms of the large size of its stock market whereas Bangladesh stock market contributes to the economic growth in terms of the liquidity of its stock market.
Influences of Stock Market on Real Economy: A Case Study of Bangladesh 51 THE OBJECTIVE OF THE STUDY The linkage between stock market and economic growth has occupied a central position in the development literature (see Samuel, ; Demirguc-Kunt .
Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) play vital role in monitoring the activities of brokerage houses as well as the smooth functioning of stock market through giving permission of listing companies, delisting a certain company for violation of rules and other reasons, placing a company in a specific category (e.g.
According to the IMF, Bangladesh's economy is the second fastest growing major economy of , with a rate of %.   Dhaka and Chittagong are the principal financial centers of the country, being home to the Dhaka Stock Exchange and the Chittagong Stock Exchange.