Internship Report on

The Stock Market Behavior & Impact of The Technical Analysis. A New Tread To Evaluate Dhaka Stock Exchange.

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1.1. Introduction:

The selecting topic of my proposal mainly highlighted the perspective of the technical

analysis. The research will covered the information and hypothesis those are most

highlighted to relevant move of the stock market. The technical analysis method

widely used at the investment market for forecasting the future move of an industrial

or the individual move of a bundle of the shares base on the presentation of the

graphical picture of the predicted move. The method of forecasting the share price is

mostly use at large stock exchange like Nasdeq, Sinsex. The method also used at our

country for forecast the market information at a graphical format. The research also

cover the economical movement due to the effect of the changing the base point of

any index of any industry. The research cover all the method of the technical analysis

chat those are popular and use for present the information of the stock market as the

overall or the industrial base segment. For make the research more appreciated to the

other and live we provide the core data like the daily stock quote as the fundamental

materials of the research. The research presents the information and analysis of the

market future predication form the useful data arrangement.

The report forecasting the volatility of the security market due to change of any

specific indicator that may take place due to the change of the political, economical or

the financial management decision from the specific organization or the group of back

hand peoples. The analysis mainly takes part with present data of the exchange and

predicted the graph for forecasting the future of the over all security market of the

specific group. The analysis is more useable and acceptable for valuing the market.

The technical analysis is easier and acceptable then the fundamental analysis. The

fundamental analysis deals with the traditional method for valuing the market. On the

other hand the technical analysis valuing the market in a short time.

The research mostly defines the stock price behavior and the market efficiency those

are related with the factor of the technical analysis. And also use technical analysis

indicators that impact at the analysis of the market data as over all. Use the market

efficiency form that and stock price movement those are relatively connected with the

technical analysis. The research also defines the difference between the fundamental

and technical concept that are widely practices at the analyst. At the research also give

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the view between the economist and technical analyst. The research also provide the

analytical and litterateur analysis of the topic with the concept of investment and

portfolio management theories.

1.2. Learning Goals:

The report that presents the skills of the Investment and Portfolio Management and

the implementation of the learning knowledge that we learn. The report also has the

concept of the great author and there contribution on the investment theories. And

there concept and over view that we convey inform or the contest of investment

market of Bangladesh.

1.2.1. Personal Goals:

Working under the super vision of the stock exchange is the mostly dream for me.

And the dreams turn true from my internship program. Form the working under

Dhaka Stock Exchange Limited that helps me to accomplish the practical and

theoretical knowledge. The knowledge also helps me to accomplish the

knowledge of the country largest capital market. Under the super vision of DSE –

≥ Knowledge about the trading method.

≥ The corporate behavior that generally accepted.

≥ From the stock market I also learn the relative economical factors that are

mostly connected with the movement of a nation capital market.

≥ It also gives the knowledge to work under most volatile position.

≥ The stock exchange also provides me the knowledge to work under the

diverse group.

1.2.2. Professional Goal:

Working at the stock exchange provides me more professional knowledge and

information that are important at my life. From the stock exchange increase the

level of my learning curve that helps me to retain the professional goal. Work

under the super vision of Dhaka Stock Exchange and Stock Exchange

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Commission with there honorable employees contribution give me the knowledge

to pursue the work and learning on the point. They guide me to learn the corporate

level behavior and make me more comparative tasks oriented to achieve the goal

of the organization and own. They also give the thought and knowledge to

understand the capital market mechanism and work under the most responsible

place with my little knowledge.

1.2.3. Educational Goal:

Working as an intern at Dhaka Stock Exchange covered my entire education

relevant goal. Working at Dhaka Stock Exchange where I implemented all of my

educational those I deserve form the American International University –

Bangladesh. As the student of Finance & Accounting the specific indicators those

are mostly related with the stock market movement that I learn from book as the

theory where I show the theory as a practical move. As working at Stock

Exchange they also help me to admire myself to learn the law and regulation those

are relevant with security & stock exchange commission and other factor

valuation.

≥ Learning by personal trial and error or doing -rather than verbal instruction

and demonstration.

≥ Learning in real life, rather than practice in artificial settings.

≥ Learning context specific skills - rather than general sable principles.

≥ Learning is person orientated and focused on people/relationships-rather

than information focused.

1.3. Background Instrument of the Research:

The research mainly covered the concept of the three important investment concepts. The

concepts are –

1.3.1. Analysis:

a) Technical Analysis.

b) Fundamental Analysis.

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1.3.2. Market Behavior:

a) Behavior of the Investors.

I. Index Effect.

II. Risk Taking Tendency.

b) Behavior of the Economy.

1.3.3. Market Efficiency:

a) Form of the market.

The concepts of the research depend on the theoretical and observational base analysis

which information is taking for the daily market prices of the over all stock quote form

the Dhaka Stock Exchange. And the information is rearranged for the purpose of analysis

industrial of the overall base movement of the market price behavior and the future move

of the market as the over all or industry. The technical analysis also help the investors

(rational) to make compare the between the industries future move and inform them the

importance move of the industries have in the future for investment. The research contain

the all the analysis those are related and conveyable to other to understand the concept of

the security analysis. And re – inform the new concept and use of the hypothetical

information to insure them about the move of the market. But understanding the market

movement for a small range of data like seven days closing rate of a particular industry

stock quote the investors about the move that occur at the next week. The research also

contain the market efficiency concept and economical factor Analysis those help for make

the research more informatics and relevant to the present context.

1.4. Rationale (basis of the study) of The Study:

The research basically construct for the purpose of the research. The research conveys the

information and the graphical presentation of the technical analysis. At the research we

contain the information and the concept of technical analysis and also highlighted the

pitfall and comparisons among other method with technical analysis. The research mainly

expresses the market behavior that related with economy of the nation and also gives or

predicted the information base on industry base or the total fidelity of the market. The

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research also defines the conceptual difference between the fundamental and technical

analysis. And also give the analysis or the statement base on the indicators of the

fundamental and technical terms. The research also contains the economical factors that

are relevant and influence able for the market movement. Mostly the research based on

the foundation of the –

Market Movement and the interact behavior of the investors.

The concept of technical and fundamental analysis.

The use and the predication of the technical and fundamental analysis in the view

of the graphic chat.

And the relevant market factors those are related with the economical and political

factor that prove the strong evidence about technical analysis.

1.5. Objective of The Research:

The report mainly prepare for the context of the wide use of the technical analysis at the

securities market. At the research we try to represent the finding tactics of the technical

analysis and also reveal the relation of the analysis with view of economical context. At

the report we again discuss the topic with the deep concern.

1.5.1. Broad Objective:

Mainly the objective of the research is to forecast the hidden mechanism of

the technical analysis.

1.5.2. Specific Objective:

The impact of the technical analysis and its trend, that analysis consists at

the security market.

The implementations of the concept at the market regarding the relevant

mechanism for represent the important information to the investors.

The concept also covered the movement of the behavior of the market.

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1.6. Scope of The Research:

The research has the scope of learning the market behavior and the mechanism that are

relevant to an investor to learn the concept that most widely used technique for presenting

the market information to from of chat. It also contains the pitfall of the method. The

research also has the process of learning all the relevant indicators that are mostly

connected with the investor and market behavior. And also the research gives us the

information and bird eyes view of the market efficiency. As the research avail all the

conceptual learning on the other hand it define the technical analysis as the contest of our

market.

1.7. Limitation of The Research:

The research also has the limitation of the practice the concept at the market. Our market

is not efficient like the USA market. And the efficient market hypotheses are unveiled.

The investors have lacking of the relevant education and also they went for the

investment with out the concern of the expert. And the availability the information is

toughest for prepare a research on the specific topic.

1.8. Methodology of The Study:

Form the colleting data we use the theoretical and analysis base information analysis to

find out the base of the factor that select as the topic for the report. For analysis the

technical analysis, we use financial tools like transaction explorer and also use the

statistical tools for analysis the data.

1.9. Data Collection Method:

Data are most important instrument of the research. And the data are collecting though

primary source and secondary source.

i. Primary Data:

Collecting the primary data for the research is difficult to manage. For that reason

we mostly depend on the secondary source.

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ii. Secondary Data:

For the research analysis depend on the secondary sources. Because unavailability

of the primary data, we mostly depend on the stock exchange daily stock price for

the research.

iii. Observation:

The data collection also depend on the observation the trend of the research.

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2.1. History of Dhaka Stock Exchange

In 1952 the Government of East Pakistan realized the necessity of establish a capital

market for growing the national capital and also assist the local and international

organization to accumulated the capital to boost the national business. And the

government also fined Calcutta Stock Exchange denied to transact the East Pakistan Base

organization share at their market. For that reason and hope to developed the capital

market in East Pakistan. 1953 the government setup a starring committee for the

formation of the stock exchange at Dhaka. On the point the government also proposed

that Karachi open an out office at Dhaka to operating the capital market movement, but

the time the pioneer of the East Pakistan business association analysis the need of the

capital market for their own. The need realized by That Dhaka Narayanganj Chamber Of

Commerce & Industry they suggested there members for purchase the membership card

at the Rs. 2,000 for proposed stock exchange. Although the organization operated the

formal operation form 1956 after obtain the Certificates of Commencements of Business.

But they shifted toward Dhaka in 1958 and started functional at Narayanganj Chamber of

Commerce building at Motijheel Commercial Area. And in 1959 the stock exchange

shifted to their own location for operated their business.

2.1. A. About Dhaka Stock Exchange:

Dhaka Stock Exchange is the first capital market in Bangladesh for keeping the interest of

the large organization for accumulated the ventral capital from the investors of the nation

or by influence international investor toward our capital market and increase the strength

of local organization for invest at the profitable sector to boost the national economy. The

market operated from 1954 to till as the independent public limited organization under the

act – 1913 & 1994. The organization has its own glance to serve as the capital market to

bring the industrial revolution and it insist the investor to invest at the market. And the

organization has its own rules and regulation to control over the market. The organization

also provides the economical and the industrial movement information toward the

investor to make our market acceptable to outside of the nation. And organization also

operates the operation base on the information technology and it has the promise toward

its investor to increase the development of the informatics market to keep the interest of

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the investor and protect them from the volatility of the associated risk rise for the

information. The organization also has the control over the third party like the broker

house and other interest group and controls them its own rules. The organization has the

policy to bring more investors at the place and composite several types of index for

influence the investors and listed organization toward the capital market. Make the

market more attractive DSE generate the DSE top 20 organization index and also

generate the general index for the investor to have the knowledge about the market

condition. They have its website and they make the as possible as easy for the investor.

And the website is compiling with information and other helpful article that help the

investor to accumulated the deep idea about our market and economy. DSE have its own

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hr management policy and training academy for have the sound employee to perform the

job efficiently.

2.1. A. Glance of DSE:

a) Incorporated as East Pakistan Stock Exchange Association Ltd.: 28th April 1954

b) Start of Formal Trading: 1956

c) Renamed as East Pakistan Stock Exchange Ltd.: 23rd June 1962

d) Renamed as Dacca Stock Exchange Ltd.: 13th May 1964

e) Trading Suspended under new State Policy: 16th December 1971

f) Trading Resumed in Bangladesh: 16 August 1976

g) Starting of All Share price Index calculation: 16th September 1986

h) Share price Indices calculation on basis of IFC Designed formula: 1st November

1993

i) Starting of automated trading: 10th August 1998

j) Starting of DSE-20 Index calculation: January 2001

k) Starting of DSE General Index calculation: 27th November 2001

l) Start of CDS through CDBL: 24th January 2004

m) DSE All share price Index (DSI) re introduced: 28th March 2005

2.2. Formation of DSE (base on the legal term):

The organization formatting based on the company act 1913. In 1954 the authorized

capital for the organization was Rs. 0.3 million which are divided in to 150 shares each

one was Rs. 2,000. And they increase the authorized capital to Rs. 0.5 million in the year

1964.

2.3. Logistic of DSE:

Dhaka Stock Exchange Limited have their own land for the operating the operation. From

the beginning they try to organize all the activities to support all the operation from their

own management system. The organization also have the own management policy and

other relevant support to make the capital market more informatics that the capital market

move its activities on the constant move.

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Logistic in a glance

Land DSE have the 8.75 Kattah of land at the downtown.

Location It’s situated at the 9/F, Motijheel Commercial Area.

Infrastructure The organization have the own 10 stored building that

situated at the 9/F, Motijheel Commercial Area. At the

building the organization has their own office and the

trading floor.

Information Technology As the important place of the national capital market it

have its own internet back born and other supported

system like – personal computer, fiber optic link and

other facilities that assists the organization to promote the

capital market form sophisticated manner. They also have

the modern securities trading software that assist all the

transaction of the organization more effective manner.

2.4. Objective of DSE:

The objective of the exchange is to establish a sound and stable capital market based on

just and equitable principles of trade as to conduct the business in securities giving due

regards to the public interest. The exchange provides the listed companies with a channel

to seek the fund form the public at same time it provide the investors a place to buy and

sell shares of the listed companies.

The exchange is the nonprofit making public company and therefore the property and

income of the exchange are applied towards the objectives of the exchange and portion of

profit is paid or distributed to its members in the form of dividend or bond.

Evelop a strong platform for entrepreneurs raising capital.

Provide a fully automated trading system with most modern amenities to ensure.

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Quick, easy, accurate transactions and easily accessible to all.

Undertake any business relating to the Stock Exchange, such as a clearing house,

securities depository center or similar activities.

Develop a professional service culture through mandatory corporate membership.

Provide an investment opportunity for small and large investors.

Attract non-resident Bangladeshis to invest in Bangladesh stock market.

Collect preserve and disseminate data and information on stock exchange.

Develop a research cell for analyzing status of the market and economy.

2.5. Mission of DSE:

The Dhaka Stock Exchange believes that a dynamic, automated, transparent stock

exchange is needed in Bangladesh. 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.

2.6. Legal Control:

The Dhaka Stock Exchange is registered as public limited company and its activities are

regulated by its Article of Association rules and regulation and bye – laws alone with the

security and exchange ordinance, 1969, company act 1994 & security & exchange

commission Act, 1993.

2.7. Function of DSE:

As site at the center of the national capital market Dhaka Stock Exchange have some

function those function guide them to attend the long term goal for the organization and

also highlighted member organization.

Functions are –

a) Listing of Companies. And the listing of the member organization act on the rules

of listing regulation.

b) Provide the screen based automated trading of listing securities.

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c) Settlement of trading base on the settlement of transaction regulation.

d) Gifting of share approval to the transaction / transfer of share outside the trading

system of the exchange act. And act is executed on the listing regulation 42.

e) Market administration and control.

f) Market surveillance.

g) Publication of monthly review.

h) Monitoring the activities of the listed companies. Monitoring take place as per the

existing regulation of the DSE.

i) Investor grievance cell.

j) Investor’s protection fund. And the function takes on the act investor protection

fund regulations 1999.

k) Announcement of price sensitive or other information about listed companies

through online.

2.8. Rules Regulation of DSE

DSE have its own rules and regulation for executing all the activities base on the law. The

regulations are taking place on to protect the investor’s interest and also listed

organization. And commission also executed the laws and regulation for protect the

capital market from the digester involves by the economy and other illegal interest group.

Exchange take laws and other restriction base on the decision of the SEC.

Dhaka Stock Exchange Have the regulation and the regulation are –

a) The law and regulation for the listing as the member of DSE.

b) The Margin Law

c) The Settlement Act.

d) The Investor Protection Act.

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Those are the important acts are executed by DSE for make the market more spontaneous

and protect the interest of the investors as also for the listed organization.

2.9. Regulatory Structure Overview:

This hierarchy show the level of the delegated authority toward the exchange from

government and the structure also show legal controlling process of Dhaka Stock

Exchange.

Figure - 10:

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2.10. Organ gram of Dhaka Stock Exchange

The organ grams show the hierarchy of Dhaka Stock Exchange Limited. It also holds the

information of the respectable manager’s work according to earning the goal of DSE. And

Chant also contains their respective function for retain the goal for the exchange and also

keep the interest of investors.

Stock Exchange Commission divided their function for earning the goal to meet the

success of the third world challenge –

Following are the functions of the CEO and the various Departments of DSE:

2.10.1. Systems: The Systems Department carries out the following

functions:

Deal with user queries.

Manage communication network.

Manage information technology developments and suppliers.

Manage internal information technology awareness.

Manage trading and operate vista settlement system.

Maintain master file.

Print daily reports and produce statistics.

Support internal users and setup and train new system users.

2.10.2. Clearing, Settlement & DP: This department is responsible for:

Delivering cheques and shares to members.

File and withdraw stock from vault.

Deal with bad delivery procedures.

Manage security receive shares from members.

Opening of BO accounts and provide other depository services.

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2.10.3. Market Operations: This department carries out the following

functions:

Monitor public information.

Monitor, receive and disseminate regular company information.

On-line surveillance.

Inspection visits to members.

Receive and disseminate price sensitive company information.

Receive and manage investor complaints.

Receive and manage other complaints.

Manage and monitor OTC facilities.

2.10.4 Listing, Marketing & Education: This department is responsible

for the following:

Arrange training.

Ad hoc legal problems.

Liaison with Securities and Exchange Commission.

Maintain master organ gram.

Maintain personnel files and staff list.

Monitor and record leave requests and leave taken.

Monitor rules and regulations.

Monitor, receive and disseminate regular company information.

Respond to requests for information, member’s queries and complaints.

2.10.5. Finance & Administration: This department is responsible for

the following:

Act as company secretary.

Manage DSE finances.

Manage income tax deductions and payments.

Manage petty cash.

Prepare and pay invoices.

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Prepare primary accounts.

Receive and bank cheques.

Reconcile bank accounts and regular cheques.

2.10.6. Research, Corporate Development & Information:

This department carries out the following functions:

Maintain library contents.

Press cuttings and press relations.

Produce portfolio and other DSE publications.

Public relations.

Investor's information cell.

2.11. Trading Policy

DSE also control over the trading of stock at the market. And commissions also have

some laws for limited the transaction of the stock or the security at exchange which

creates a volatility of share movement at the market. After 1996 stock exchange crush

SEC & DSE work together to protect the interest of the investor from the illegal

transformation of the capital at the market. Protect the interest of the investor and the

listed organization DSE introduces the automated system for monitoring the overall

transaction of the investors. Recently exchange commission also controls over the

investor by the law for open the BO Account. This may protect the trading policy of stock

exchange and protect investors from the unwelcome volatility.

2.12. Automation Policy

The world become in the era of information technology. And the information is vital

element at the world for vesting the business. And it’s only possible by the improvement

of the information technology. Dhaka stock exchange realizes the consequence of the

information technology at DSE. It was understood by DSE that technology would ensure

transparency, timeliness and satisfaction in customer service. Considering these DSE has

introduced Automated Trading System on 10th August 1998, brought the trading floor

close to the investors. In other words, the trading floor has moved right into the member's

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office premises where an investor can place buy/sell orders. After Automation more

desired efficiency and transparency have come in trading and settlement operations of the

Exchange.

DSE have its own serves and software for control over the market. Through the support of

information system they control over the market –

a) Market.

b) Trading Sessions.

c) Market Information.

d) Broker Support.

2.13. The market movement and Dhaka Stock Exchange:

Market Capitalization:

in 2005-2006 fiscal year the market capitalization by the investor and the listed

organization is BDT 215.42 billion. And the market capitalization leads the 5.08% at the

national GDP by Dhaka Stock Exchange.

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But DSE shows the five year market capitalization at the exhibit and the exhibit present

the management policy and other effect that exchange create toward the investor mind for

invest at the capital market.

And the pie chat show the market movement that take place by the investor choice and

also present the portainal information about the industries. And the chant also present the

information that the performation of the individual industry at exchange.

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3.1. Topic Analysis:

The report deals with the two terminologies for the matter that deals with the relevant

instrument of Dhaka Stock Exchange. The topic contains the most important phases, one

is “The Stock Market Behavior” and the other contains the trends or the predication of the

market information in the form of the graph is “The Impact of the Technical Analysis”.

The topic deals with the capital market of the nation for the consequence and make the

report more relevant we use the regarding the topic that are help me for predict the report

more appropriate and help me for define the topic more efficiently.

The stock market is the place where we always have the information of the demand and

the supply. It’s the true place where the demand and the supply theories play and

important game for make the market more efficient and in a strong form. The market also

deals with the most reflection of the nation economy.

For analysis the first Phase of the topic “The Stock Market Behavior’ that contain some

Instruments are –

The capital market of the behavior of the stock market basically depends on those

influences which mostly influence the market in the form of the strong or the weak form.

For analysis the market we also adopt or use the EMH (Efficient Market Hypothesis) that

have the connection between all the fundamental instruments for analysis the market

behavior of DSE. At the market hypotheses we have the strong connection between the

economy of the nation and the information also provide the vital role at the market

behavior. Because, at the Efficient Market the information are available for analysis the

market condition. And the market movements from the investors are highly depending on

the abandon information that helps them to retain the market with go concern attitude.

Before we analysis the market in a deep sense first we amalgam the Bangladeshi capital

market with relationship with EMH.

The EMH only deals with the price movement matter, but in the sense of the market in

the context of Bangladesh we also add some of the instrument that assists us to

understand the market. As the nation stand on the position of the third world nation we

have some of the limitation that mostly reflected at our capital market.

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And some of the context the EMH theory does not applicable at those nations. The nation

does not have the efficient information system that generated the information for the

investor to invest at the market. Investor also have the fairness in the there mind about the

change or they have the risk to loss all the investment at the market. Because the

developing market have more risk to invest then the develop market. The develop market

have the abandon facilities of the information and the government ensure the well policy

to protect the market basis of the transparency movement of the information and also

implement the investment orient laws to protect the interest of the investors and also keep

the interest of the new organization and insist them toward the capital market for create

new investment at the economy. They also assist the foreign investors to invest at the

market. At the market the Exchange Commission always take policy basically on the

segment of the industries and they always keep the information of the market change or

change of the policy or other focusing matter that create a visvercial affect at the market

for the change the price of any shares. They always provide the transparency at there

activities and also keep the business more advance to protect form the black markets for

Figure - 2

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the collapse. All market like the capital market or any market related with the product or

service movement mostly depends on the sufficient movement of the information. In the

third world nation like Bangladesh most of the market effect occurred or will occurring in

the form of the unexpected movement of the real information. The mobility of the

information that conveys the real information will change form the person to other

person. And the end person has the information full of changes that make a crucial effect

at the market. For that reason the market have the dramatic effect on the market behavior.

At the same manner happen in the sector of the capital market. The capital market

behavior also depends or effected in the matter of the movement of the proper

information in the proper channel. And the information also relay by –

3.1.1. Investors.

3.1.2. Government Policy.

a. Security & Exchange Commission.

b. Bangladesh Bank.

3.1.3. Media.

a. Print Media

b. Television

3.1.4. Financial Institution.

b. Broker House.

c. Private Bank.

The information also change by the interested people those doesn’t have the investment

market. But in the consequence they spread the information to other for the investment.

Among them some of have the proper predication capability to ensure the proper

consequence and some of have lack of the knowledge of the predication of the

information also put the investment market in the more inconsequence position. Those

types of the information also make the market behavior in an inefficient manner. The

market behavior also effect by the decision of the member organization. The member

organization effect is more devastate then the change of the policy of the authority. For

understanding he share or the capital market behavior first we try to realize the

information those are mostly relevant with the change of the market. And find the source

of the information, if the source is reliable then we make ourselves aware form it.

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For more specification of the topic we use those elements or the instrument those have the

strong relationship with the topic to make the topic more effective and acceptable.

Analysis the topic on the basic of the instrument and find relationship with Dhaka Stock

Exchange.

3.2. Economy:

The stock market behavior also depends on the nation economical change. If the change

occurs and brings a positive result for the nation and over all industries it creates a

positive impact at the stock exchange also. For analysis the topic we find that over all

nation economy have the effective relationship with the capital market. In the third world

economy like Bangladeshi stock market have the more effective relationship with the

economical instrument. For analysis the market effectiveness we also look after all the

micro and macro factors that have the direct influence form the individual investor,

member organization and also as the nation or government as the whole.

As the analysis micro effects are take place through (for the individual and the

organization) –

a) Level of the income by the organization and the individual.

b) The change in the price of the commodity for individual as the end product and

also as the raw material for the organization for process the final product or raw

material for other organization.

c) The level of the saving by the individual and for the organization.

d) The abandon of the resource (land, machine etc.) for the individual and

organization.

e) The level of the consumption from the individual and the organization.

f) The level of the working opportunity or rate of unemployment.

The micro level impact at the economy accumulated all the behavior of the individual

investors at the exchange. If any level of the satisfaction or any change occurred at the

economy and that affected both the micro level investor like individual and the

organization it play an impact on the behavior of the stock exchange. In the third world

nation like Bangladesh the effect play most effective in the sense of the investment or the

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capital market as a threat. But the macro level effect like the change in the proportion of

the GDP or the GNP of the nation also play a vital role at the change behavior of the

exchange. The macro level impact imposes by the government as the basis of all the

accumulation of the micro level influence. At the macro level economy the government

imposed the entire instrument as in the form of the nation income and expenditure. The

macro level influence government presents the contribution of the organization or the

department as the proportional express in a form of the percentage. The change in the

sense of any discipline that may have the direct or indirect influence in the GDP or GPN

of the nation that also reflect at the overall market and also it have the strong effect at the

price movement behavior of the stock at the exchange and the behavior of the capital

market change.

At the macro level government also try to come – up with new ideal and rules regulation

to protect the nation income and other sensitive matter that can solve the entire problem

like –

a) Exchange Rate change and fixed the change rate with the national currency.

b) Limit the level of the import.

c) Give more facilities to the exporter to contributing at the national income.

d) Change the interest rate and fixed it as the flexible rate that help the investors or

individual to implement the loan at the respectable place.

e) Control the price of the commodity that helps the consumer to consume at the

expected level.

f) Give more policy toward the saving and make profitable or the risk free place for

investment by the individual or the organization.

g) For protect the macro level investment market like the capital market the central

bank, security and exchange commission take the approach to protect the market

for the economical bubbles and other influence that hit the market as over all

devastation.

But in the macro level the economy of the nation mostly depends on the government rules

and regulation those are take place for save the economy form the economical erosion.

For protection the nation and over all economy government and regulatory commission

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take the important steps to protect the market like the capital market and other non –

variable market.

But our topic related with market behavior of the capital market and the information like

the macro or micro level economy have the control over the market as the basic

instrument of the national economy. And the economies also covered the behavior of the

investors and also have the indication of the market movement policy that take by the

government and exchange as an authority.

The stock market movement also depends on the law & regulation those are taken by the

government, or by the security & exchange commission. The stock market behavior

always reflected through the law of the economical scale and the regulation taken placed

by the exchange. But behave of the market influence by the member organization and

investors motive.

The market also interrupts by the hidden risk that market may or may not be executed.

The riskiness of the investment at the market by the investors always arises from the

natural or determination by the pre – observation. And the risk factor of investment

begets from the change of the policy by the government or the influence by the economy

take place at the game.

3.3. How risk factor stemming stock market behavior:

The risk factors that come at the mind of the investors from their mind or the pre –

calculation of the market trends by their own. But the market risk arises from the

movement of the national economy. The behavior of the market also depends on the

systematic and unsystematic risk factors those influence the market for investment. The

change like –

a) Inflection rate.

b) Unequal balance of payment.

c) Consumption level.

d) Change of the political power.

e) Inefficient management policy taken by the government.

f) Level of the direct investment.

g) Natural Disaster.

27

h) Firm Economy.

i) Local currency devaluation.

j) Terrorism.

But that all are the external factor that influence the risk of the market. But the risk factors

of the exchange take place by the member organization, broker house and the hidden

policies take place by the security & exchange commission as the Back Hand tactics for

create the unfavorable market risk for the investor for investment. But the risk factors at

the market take place by the micro and macro factors that hindering market. In the

practical sense Develop economy market is less volatile or riskless then the emerging or

under develops nation market. And the risk related with economy is stronger then market

making risk by the member organization or commission.

At the exchange the market risk measured the individual risk of the security by the

numerical form and the symbol beta “β”. The beta represents the risk of the security as

the individual. The beta rate is less then 1 means the risk of the investment is less risky. If

the rate up the limit of 1 then we investment or the market have the risk for investment.

For make the statement more realistic we use an example for analysis the market relevant

risk –

Assume that an investor has three different kinds of portfolio (port – 1, port – 2, port – 3)

that have the measureable or the relevant level of the beta market risk constant 1 but the

investment have the beta is respectively – Port – 1: 1.5, Port – 2: 1.0, Port – 3: 0.6.

Figure – 02:

Secu

rity

Ret

urn

Market Return

Port – 1: 1.5

Port - 2: 1.0

Port – 3: 0.6

28

The figure show the different rate of beta that predicting divers able risk of the stock or

portfolio that have the market related risk measured by the beta. It’s the information of an

investor portfolio. But on the level of market as overall the beta calculation for a single

portfolio is not sufficient to measure the risk of the overall market. But the beta contains a

measurement of the risk as a portfolio but it has the risk rate of the market. But the risk

free rate of the market for the security is assign form the Bangladesh Bank. The risk free

rate is fixed base on the government Treasury bond interest rate and the entire member

organization take as the risk free interest rate for calculating the market risk. And the rate

also help the individual investor for invest at the market with some hope of arise from the

risk. And the risk factors for the stock obstacle the market behavior and also hampers the

movement of the share or securities transaction among the interest buyer or the market.

But the market mostly highlighted from the individual investors and their risk taking

tendency or the capability of absorb. The regarding risk behavior also influences the

security market behavior. The risk factor create from the economy is the main obstacle to

vesting security market investment in Bangladesh. The risk taking attitude by the investor

also change the stock market, but the concept base on the risk taking or risk avers

tendency by the investor. But the associated risk with security also threats the market.

Sources of the risk are –

a) Interest Rate Risk.

b) Market Risk.

c) Inflation Risk.

d) Business Risk.

e) Finance Risk.

f) Liquidity Risk.

g) Exchange Risk.

h) Country Risk.

And the security market related with those source of risk. And associated market risk also

rise form those risk source. The sources of the risk also articulated at security and stock

exchange commission rules. (Appendix - A)

29

For survive the market from the associated risk and other relevant factors those mostly

covered the risk tendency of the market. The associated risk of the capital market arises

with total risk of the security. And security risk combines with the systematic risk and

non – systematic risk.

The stock market behavior mostly depends on the laying risk those associated with the

market, economy, individual investors and their risk taking myth and also by the hidden

policies taken by the member organization.

For analysis the topic more clear and specific to understand we combine the economical

and the market factor together to analysis the topic in the form of the specific indication.

And at the topic analysis those relevant information provide for the analysis the topic for

keeping the interest of our investors, member organization as the part of the micro

economy factors. And information provide base on the national statistic and the behavior

analysis base on the combination of the economical and investment and portfolio

management theories those have the strong relation at the movement of the market and its

behavior those are not understand by our investors. Because, most of our investors are the

rational investor.

3.4. Investor Analysis:

The investors are the most important instrument of the security market. At the security

and exchange market in Bangladesh the investors are mostly rational and they don’t

analysis the stock before they went for the investment. Before we analysis the types of

investors for the topic analysis we mainly clarify ourselves about the risk taking tendency

of the investors through the types of the risk. Because associated risk with investment at

Figure – 3

Total Risk = General Risk + Specific Risk

= Market Risk + Issuer Risk

= Systematic Risk + Non Systematic Risk

30

the market it also create a positive impact for the investment. But the risk at the market

associated with the systematic risk those arise from the economy and some unsystematic

risk occurred form the risk attributed to factors unique to the security. Both the factors

mostly penetrated for the investors for investment at the market. Bangladeshi investors

most are the rational investor. For analysis the topic of the report we segmented our

investor base on -

Figure – 04

Most of our investors are the risk averse. And they don’t like the risk by born. Among

them some of them have the risk taking tendency. And those tendency help them to grabs

the market, also assign them to earn a profit from there portfolio. Analysis the risk taking

tendency of the investors government also provide the act at “Security & Stock Exchange

Commission Act, 1969” for protecting the individual or the institutional investor. And at

the act commission forecasted the entire right and protection instrument for the investors.

For analysis the types of the investors we also analysis the intact behavior of our

Bangladeshi investors and how their behave act at the market movement.

3.4.1. The investor’s behavior regarding the risk taking tendency:

The behavior of the investor, also one of the factors for the investment market. the

behavior of the investors play positive motive at the market behavior. For the analysis of

behavior of investor we find –

a) Tolerance level of the risk an investor should absorbed.

b) Risk taking tendency of the investors.

c) The mentality for keeping or off the security.

d) Expected level of the profit that he want to begets for the securities at

the short term or holds for the long terms.

31

e) Concept of the investors to arrange his/her portfolio with the

combination of the risk and risk less investment for the securities.

Those behavioral concepts of investors make a impact on the movement of the securities

at the market. But the behavior of the investor comes to them at the change of the micro

and macro level movement at economy by the government or by the individual. Analysis

the behavior of the Bangladeshi investor, at first we analysis our economy. As we stand at

the third world economic nation our economy always influence by the policies and other

foreign factors that heal the development of our economy. And our investors always have

the doubt of the hidden risk those are associated with the nation and economical factors.

Those create a negative impact at our investors mind for holding the securities as a long

time for earns the higher profit. Associated risk and the policy of the government and

member organization create impact at investors mind for invest their money for the long

term. For that manner the behaviors of our investors are –

a) Low risk taking tendency.

b) Lack of believe on the government policy.

c) Lack of the tendency for holding the securities for the long run.

d) With out understanding the market or the types of the securities they

always run for the profit for them at the short time.

3.5. Information:

Information is the most important part of the security market. All the movement at the

stock market like the change of the share price or the crash of the securities occurred due

to have the informational transaction for a specific group of the securities. The hidden

information takes place or change by SEC for keeping the interest of the investors at the

market. But the market the impact of the information mostly depends on source and also

its truthfulness. After that the real investor try to find that the information have

misinterpreted at time of convey or the providing information is the genuine. For the

impact at the market form the information interpretation first an investors analysis to try

to find the channel of the information that s/he receive for market analysis. And the

information like the past and the present information help the investor to pre determining

the market position and help to hold the market with his/her securities. But in the third

world the information of the stock market is quite unabandon. And the truthfulness of the

32

information becomes one of the facts for belief. For that reason the security and stock

market are more volatile then the develop market. And our national market also volatile

because the channel of the information is not constructs properly and the investors have

the stereo type’s minds. Our people have the problem to change the main message in their

own word and the main information goes to the end user at the change meaning. For that

reason the information at our security exchange play a dramatic role and the behavior of

the market has been change. For make the market more effective and base on the

information we most create a securable information channel with the combination of –

a) Internet.

b) Telecommunication.

c) Radio & Television.

d) Print Media.

e) Broker House.

f) Member Organization.

But we need more communication among the member organization and the member

organization posted their information relevant with the change of the policy by

management for the organization. And security & stock exchange commission give the

daily information of the transaction securities for their website and also give the

information like the daily market transaction report to the print media those don’t have

the access at the modern information highway. As a third world nation our stock

exchange provides that information through their website to inform the interest investors

about the market position. The flow of the information at the market is the symbol of the

Efficient Market Hypothesis theory. And the market behavior also acts of change base on

the mobility of the information and its reliability which is the most important part of the

EMH. As the part of the third world capital market our exchange and the media channels

keeps the right of the investor through provide the market related information like the

change of the security price or provide the information about those organization lunch the

new IPO or provide the dividend to the their respective security holders. For the matter of

the information and make the investors more enact about the market condition and take

their investment analysis behavior toward our investment market. The exchange

commission posted more important information at the official website of the Dhaka Stock

Exchange make the market more reliable to the local investors and also influences foreign

33

investors to invest at the our market. Information is the main vehicle at the investment

market and the change of the market depends on the change of the information. And it’s

also an instrument for the EMH. If the information is available to investors and the

investors are aware about all the change at the market and its impact then the information

become the vehicle of the EMH theory.

As we stand at the serial of the third world economical national and devastating

improvement at the print media, internet base communication and telecast media help us

to improve our security market. And it only possible to us for captures all the vehicle of

the information technology in the low price and the interest of the stake holder. And the

past experience of the market crush due to the relation with the lack of the information

give us more interested on the information base investment market handing. Due to lack

of the information movement at the stock holders in 1996 the Dhaka Stock Exchange

faces a bubble effect at the market. The behavior of the market also influence by the

bubble at the time. And the bubble occurred at the market due to the informational gap

between the investors, broker house and the stock exchange authority.

3.6. Picture of the market in 1996:

Trade on the Dhaka Stock Exchange (DSE) was dormant until 1993. The fourth quarter of

1996 was marked by feverish activity on the DSE, and on the smaller Chittagong Stock

Exchange (CSE). In September, October, and the first two weeks of November, records

were broken daily as share prices soared. Prices soon bore little relation to the current

profitability or future prospects of the companies concerned. Up to 300,000 first-time

buyers joined in the bonanza, driving the limited number of stocks traded-210-to a peak

on 16 November, 1996, when the all-share index reached 3,627, up from around 1,000 in

June. By 4 November, market capitalization had reached an unsustainable $6 billion,

equivalent to some 20% of the country's GDP. The government began to cool down the

market by selling off state-owned enterprises. In late December, the central bank

announced that T2 billion ($47 million) would be available to the state-run Investment

Corporation of Bangladesh to buy shares and give some support to the market, but the

market crashed despite these preventative measures. In 1997, 37 stock brokers were

charged with market manipulation in the DSE boom and crash of 1996. The market also

collapse for the crab market broker influence the market for the bubble.

34

The stock exchange is the important part of economy. In the third world country like us,

its play a vital rule for the organization to create the marketable capital forms the

investors. In the third world country basically the investors are divided in two parts.

Figure – 05:

The emotional investors are the rational part of the investment business that is invested at

the capital market without the technique analysis on over all market intervals. On the

other hand the Technical invertors are analysis the over all data and the market index of

the stock exchange and also find out the return and policy of the organization they like to

invest.

For the Dhaka Stock Exchange Scenario in the 1995 to 1996 the investors are related with

the business and have small knowledge about the investment market policy speculation

they first recognize the future bubble that occur at the exchange. At the point the

fundamental or the technical investor safe their investment form the market by the policy

that they take to come out form the collapse. On the other hand the rational or the

emotional investor like to gaps the market shares with out the analysis the movement of

the market that occurred in 1996. The stock price will goes up due to the invisible hand.

Due the interception of the invisible hand, the make an unthinkable scarcity of the share

35

flow in the market. Due to keep the share on the invisible hand the market price of the

general index goes upward. For the scarcity of the reputed organization share in the

market at the investment market all other related organization share price also went up. At

the time the rational/ emotional investor invest at the market for getting the high return

from their investment. But the technical investors are very strong form to find out the

behind reasons for the unexpected increase the price of the share in the market.

Analysis the topic more specific and relevant with the movement of the market regarding

the policy, economical factors, movement of the information and risk taking tendency of

the investor are analysis for the topic. Make the topic more elaborately and specific we

use a case where the case contain all the instrument of security market analysis -

3.6.1. Case Study:

The Stock Exchange Collapse and the Investors Motive

Mr. Masum was very shocked for invest at the stock market. But the other hand his

friends Mr. Masud have a good command and response about the stock exchange. At

evening Mr. Masud talk with Mr. Masum About the investment at the capital market. On

the point Mr. Masum was disappoint about the investment and also told Mr. Masud about

the 1996 dilemma at Dhaka Stock Exchange. At the point Mr. Masud asked Farhad why

he disappointed about the investment at the stock exchange. But Mr. Masud asked Mr.

Masum did you have any experience form the market. Mr. Masum yes I had the

experience about the stock market where I loss a lake take on the investment on the

specific share that become collapse in one day. At the point Mr. Masud asked Mr. Masum

can you invest all the money at the market for the specific share. Yes, at the time I had

not proper information and knowledge about the investment market. Mr. Masud asked

Mr. Masum how your invest money at the share market, can you told me the history that

can make you backward for invest at the market.

Farhad told the back flash for about the investment and why he dislikes the stock

market to Mr. Masud –

Friend at the morning of the November I walk out form my home toward my office, when

I was reached at the Motijheel, I saw rush of human are gathering and some of the people

are raise there voice about something that they hold at there hands. People move toward

36

them and buy the specific paper for there name. That also make me influence toward the

market where I thing every invested there money for getting high return. Why I am not?

For that instant the inner filling to earn higher can push me forward to invest at the

market with out having any experience.

Mr. Masud asked Mr. Masum can you have the well knowledge and information about

the stock market.

Mr. Masum– No, I could not have the proper information and interest on the exchange

that creates that day. But the higher return of the other influence me to invest at the

market. But Mr. Masud, are you invested at the capital market in 1996. Yes I did. But I

can not loss all of my investment. Mr. Masud how you save your investment at the market

and still you is one of the people who also invested at the investment market with out

scare. But look on me after the devastation of the share market it make me more negative

and scared think and concept that it’s the place for the gamblers. Mr. Masum where form

you bought the share. Inside the market or form the street broker. Mr. Masum yes I

bought for the street broker. Oh! Buy form the street broker means the Crab market not

form the real place. Yes, but I have question Mr. Masud; because you are the investor at

investment market can u define me about the crab market. Mr. Masud obviously because

some wrong perception on the market makes you more misguided about the market. Lets

I clarify you about the stock exchange before and after the dilemma. Lets I conform you

why you loss your capital at the stock market. Before you invest do you knew the

condition about the market or where you went for invest and how you hold or maximize

your investment at the stock market. Lets I give you the information why you are dose not

sustain in the market.

First, you invest your all the money at the street through the brokers that was call the Crab

market. For the collapse of the 1996 market the major role also play by the street brokers

or the crab market brokers.

Mr. Masum asked Mr. Masud about the crab market, and Mr. Masud told the about the

crab market is the place where the brokers are run the stock market beside the central

stock market and they call the price of the specific share that call the ask price and the

interested buyer purchase the stocks. Basically the collapse of the market was consists by

the crab market, the limits of the law and regulation and the unethical exercise at stock

37

exchange is the main culprit for the devastation of the economical market. On November,

1996 the stock exchange have the devastative crush of the index. The bubble occur for the

beginning form the November and the market in collapse at the ending of the month. In

1996 the stock exchange have the over valuation of stock and suddenly market have a

bubble occur at the stock exchange. Due to the bubble the investors are loss the

concentration for invest at the market.

Mr. Masum also asked Mr. Masud about the formation of the stock exchange, the rules

that stock exchange have to operated for stop the interrupt of the flow of the securities at

the market. After asking the question Mr. Masud told the do not know about the

formation of the stock exchange lets I knowing you how Dhaka Stock Exchange Form

and the roles and regulation that maintain for the member of the stock exchange -

The stock exchange is the place for the public limited organization to create the capital

form the public. In Bangladesh we have stock exchange commission that they operated

there operation at Dhaka and Chittagone. The exchange has there own regulation and

control over the activities.

Formation:

For necessary of the stock exchange in the East Pakistan the government and the other

elite business take a step for established the exchange in Dhaka in 1953. The market first

name was East Pakistan Stock Exchange Association Ltd. 1964 The Name of East

Pakistan Stock Exchange Limited Was Changed to “Dhaka Stock Exchange Ltd.”

The exchange is formatted under the Company Act- 1913. Where the formation of the

company the authorized capital was Rs. 300,000 are equally divided into Rs. 2,000 share

each.

As a public limited company Dhaka Stock Exchange has its own rules and regulation for

control the external and internal process that exist in the exchange. The exchange

regulated by Articles of Association rules & regulations and bye-laws along with the

Securities and Exchange Ordinance, 1969, Companies Act 1994 & Securities &

Exchange Commission Act, 1993.

38

Function:

As the organization operated there activities for the capital investment create market they

have some function to control over the whole activities of the member organization.

The function of the 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 42)

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 bye laws 1997).

Investors Protection Fund (As per investor protection fund Regulations 1999)

Announcement of Price sensitive or other information about listed companies

through online.

After knowing the formation and the function of the stock exchange Mr. Masud told Mr.

Masum about the trading process and the related rules and regulation that exchange

maintain for the members and the investors for the market.

After the question Mr. Masum asked Mr. Masud did Dhaka stock exchange have any

trading process at market regarding the trading process become easier for the investors.

On the word Mr. Masud describe the trading process that now existing at the market and

also describe the process that have before 1996 stock exchange dilemma.

Mr. Masud: Before I describe the trading process, I inform you about the market situation

at 1996 -

39

The market picture at 1996:

Trade on the Dhaka Stock Exchange (DSE) was dormant until 1993. The fourth quarter of

1996 was marked by feverish activity on the DSE, and on the smaller Chittagong Stock

Exchange (CSE). In September, October, and the first two weeks of November, records

were broken daily as share prices soared. Prices soon bore little relation to the current

profitability or future prospects of the companies concerned. Up to 300,000 first-time

buyers joined in the bonanza, driving the limited number of stocks traded-210-to a peak

on 16 November, 1996, when the all-share index reached 3,627, up from around 1,000 in

June. By 4 November, market capitalization had reached an unsustainable $6 billion,

equivalent to some 20% of the country's GDP. The government began to cool down the

market by selling off state-owned enterprises. In late December, the central bank

announced that T2 billion ($47 million) would be available to the state-run Investment

Corporation of Bangladesh to buy shares and give some support to the market, but the

market crashed despite these preventative measures. In 1997, 37 stock brokers were

charged with market manipulation in the DSE boom and crash of 1996. The market also

collapse for the crab market broker influence the market for the bubble.

0.00

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1000.00

1500.00

2000.00

2500.00

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Date

Market

Ind

ex

The investors Reaction toward the Market:

The stock exchange is the important part of economy. In the third world country

like us, its play a vital rule for the organization to create the marketable capital forms the

investors. In the third world country basically the investors are divided in two parts.

40

The emotional investors are the rational part of the investment business that is

invested at the capital market without the technique analysis on over all market intervals.

On the other hand the Technical invertors are analysis the over all data and the market

index of the stock exchange and also find out the return and policy of the organization

they like to invest.

For the Dhaka Stock Exchange Scenario in the 1995 to 1996 the investors are

related with the business and have small knowledge about the investment market policy

speculation they first recognize the future bubble that occur at the exchange. At the point

the fundamental or the technical investor safe their investment form the market by the

policy that they take to come out form the collapse. On the other hand the rational or the

emotional investor like to gaps the market shares with out the analysis the movement of

the market that occurred in 1996. The stock price will goes up due to the invisible hand.

Due the interception of the invisible hand, the make an unthinkable scarcity of the share

flow in the market. Due to keep the share on the invisible hand the market price of the

general index goes upward. For the scarcity of the reputed organization share in the

market at the investment market all other related organization share price also went up. At

the time the rational/ emotional investor invest at the market for getting the high return

form their investment. But the technical investors are very strong form to find out the

behind reasons for the unexpected increase the price of the share in the market. Why the

technical investors are aware to invest at the bubble market in 1996?

Trading process:

For the beginning of the exchange the trading process was run through the floor call

system. Where the jobbers are running the call on the share with the existing price and the

investors are call for the expected price for the share. The process was run through the

middle man call the broker firm. At the process the exchange has not the existing trading

policy those exist now at the exchange. At the time there are

Every organization shares are treated as the general share.

There was no circuited broken system of the trading policy which now has by the

exchange.

41

There was not the spite of the blue chip organization hit list for the individual

trade of the stock at the market. Which is now as the DEC 20 index?

Exchange has not the electronic trading system before 1997. Where the records

are keeping on pen and paper basic.

The market also traded the shares out the exchange by the street brokers. The

street market for the share also calls the crab market.

Government doesn’t put any limitation to the investor to open the BO Account

regard the respective site for the investors.

For the increase and decrease the market index at Dhaka Stock Exchange also influenced

by the crab market. For the interception of the street brokers the market also creates some

artificial scarcity of the stock at the market. For that the market index goes up due to

increase in the price of the over all marketable shares. After the collapse of the market in

1996 the trading process and the regulation of the exchange in changed. For devastation

of the investment market took some procedure for protect the interest of the member

organization and the investors for the unacceptable circumstances government and

exchange commission take some stick rules for stop the collapse. The whole trading

processes are change. And the exchange adopted the new rules for protect the market.

After the 1996 dilemma at the investment market government introduce circuit breaker.

Mr. Masum also asked Mr. Masud that government should take any new regulation for

stop the unwise and unacceptable crush at the market. Mr. Masud told government take

policies and roles for stop this kind of vulnerability.

The new roles are –

Implemented the new computer base circuit system for a trade.

Imply the categories shares for the investors as the name as the general index and

construct DSE 20 index for the Blue chip organization.

Introduce the Electronic monitory system for safe movement of the existing

process.

For stop the unethical access of the brokers and the unexpected people at the

exchange adopt the D Mat system for give more security.

42

Also provide some guidance for the brokerage firm for control over them the flow

of the share.

Also give law and regulation toward the investor for open BO account.

(Beneficiary Owner Account)

The regulatory commission also makes mandatory the credit rating for the

member’s organization before they launch the new share at the market.

The exchange also mandatory the credit rating and rating for the organization

those organizations are listed members and also those want to be the member of

the DSE.

Mr. Masum again asked Mr. Masud “why the security and stock exchange commission

adopt the new roles for the investment market?” And at the new policies that have been

taken by the exchange some of the rules I don’t understand. Can you clarify me about the

D Mat system, the new adaptation of the Circuit breaker system? Why exchange makes

the credit rating mandatory for the member or listed organization?

Why exchange limited the BO account for the investors?

Ok, Masum lest I give the some view and information about D Mat system that DSE

adopts. The D Mat system is the process that consists of the automated or the electronic

communication system between the exchange, brokerages firm and among the investors

where they communicated between the exchange and the investors or the brokerage firm

through the internet facility. The process also adopted the consistence between the

exchange and the investors for the unwelcome access and other restriction that can protect

exchange for the unwelcome suspicion.

Mr. Masum hear about the process and told Mr. Masud, “it may like the electronic access

and the exchange also adopt the electronic base record tracking system for protect the

information and the transition record for the individual investor and also make easy to the

investor for transfer there ownership from own ship to another one.”

Mr. Masud: yes, but before the collapse of the exchange in 1996 the records are keeping

under the pen and paper base, where the bad interest investors or the unwell investor

group have the chance to take part at the unethical motive toward the stock. And the

43

exchange have demerit on the limits to open BO account for the investors. Where the

investors have the chance to active at the unethical operation? For the uncontrolled on the

BO account the crab market brokers are free to invest at the share. And they are created

the artificial demand of the stock at the market. Due to the reason the price of the

investment are arise. They are also culprits for ruined the market at the time. This is

occurred for lack of the roles and monitory policy by the DSE. But the new policy and

roles stop this kind of unethical activities at the market. After change the trading process

DSE also introduce the Circuit Breaker system for the exchange.

Mr. Masum,”can you told me how the system work?” Alright, it’s the process or the

system that DSE have to implement at the exchange. Where commission set the upper

bound and lower bound limits for individual share. Where the price of the share doesn’t

up and down below the specific or the set point by the exchange.

Mr. Masum, “they fixed it before the stock traded at the market”. Yes. For more

clarification I show you the Circuit breaker system that exchange practice. The unusual

and abnormal price fluctuation raised the Price Index to unprecedented heights. In 1996

the Securities and Exchange Commission, in order to protect the interest of the investors,

introduced Circuit Breaker System. The guidelines of Circuit Breaker System are given

below:

Standard upward and downward price limits over the previous days’ market price

applicable for each market day are as follows –

Previous day’s per share market

price

Limits

Up to taka 200 20% (twenty percent) but not exceeding Taka 35

Taka 201 to Taka 500 17.5%( seventy point five percent) but not

exceeding Taka 75

Taka 501 to Taka 1000 15% (fifteen percent) but not exceeding Taka 125

Taka 1001 to Taka 2000 12.5%(twelve percent five percent) but not

44

exceeding Taka 200

Taka 2001 to Taka 5000 10%(ten percent) but not exceeding Taka 375

Taka 5001 and above 7.5%(seven point five percent) but not exceeding

Taka 600

Source: DSE, Annual Report 1998 – 1999.

In case of new issue, free trade may be allowed for first 5 (five) consecutive market days

and after that above limit will be applicable.

In case of receipt of any price sensitive information like right issues, bonus issue and

dividend from the listed company, free trade may be allowed for subsequent 3 (three)

consecutive market days, and after that above limits will be applicable.

In case securities not traded for previous consecutive 30 market days, free trade may be

allowed for subsequent 3 (three) consecutive market days and after that above limits will

be applicable.

This information’s are important and also give new view about the market. And also

remove my fair and also inform me the condition and new adopted policy that stock

exchange takes after the collapse.

Mr. Masud: “exchange is enforcing the credit rating mandatory for all the member

organization. Because the rated can show the financial position of the organization and

the investors also know about the organization equity and debt position and they went for

the investment.

Mr. Masum when informed all the information form Mr. Masud and asked him that, “is

there any kinds of difference at the investors?”

Mr. Masud it have some difference at the investors. Some of the investor those they want

to invest at the market they study the trend of market related information and also make

him upgrade and informative against the market. These types of investors are calling the

technical investors. Before invest at the market they use the investment analysis tools for

find out the risk and return on the specific stock or the industry they like to choose.

45

Mr. Masum: “can you give me some general idea about the investment tools?” yes the

tools for analysis the markets are –

Efficient Market hypothesis:

Regarding the investment at the stock exchange the investors are looking for the

efficient market where they using some tools to getting the effective result for the

specification their there return regarding the there risk and maximize there return. The

effective capital market is concept or the practical phenomenon that market in where

security price reflect available information about the price of a particular share. Where the

information in available and the investor’s assets value based on this information? Base

on information availability the investor use the regarding tools for to know the market

situation before they went toward the investment. The market efficiencies also depend on

the traditional forms. It the traditional forms have three levels –

Weak – From Market Efficiency: At the weak – form – market

efficiency states that current security prices fully reflect all historical

information. Further, its state that investors cannot earn abnormal returns

using the historical information.

Historical information includes not just price information, but information

on the trading volume, short interest and so forth. Weak – from –

efficiency also implies that security prices do not follow recurrent and

predictable patterns. Instead, it suggests that security price follow a

random walk.

Semi – Strong Form Market Efficiency: Share prices adjust within an

arbitrarily small but finite amount of time and in an unbiased fashion to

publicly available new information, so that no excess returns can be earned

by trading on that information. Semi-strong form efficiency implies that

Fundamental analysis techniques will not be able to reliably produce

excess returns. To test for semi-strong form efficiency, the adjustments to

previously unknown news must be of a reasonable size and must be

instantaneous. To test for this, consistent upward or downward

adjustments after the initial change must be looked for. If there are any

46

such adjustments it would suggest that investors had interpreted the

information in a biased fashion and hence in an inefficient manner.

Strong – From Market Efficiency: Share prices reflect all information

and no one can earn excess returns. If there are legal barriers to private

information becoming public, as with insider trading laws, strong-form

efficiency is impossible, except in the case where the laws are universally

ignored. Studies on the U.S. stock market have shown that people do trade

on inside information. To test for strong form efficiency, a market needs to

exist where investors cannot consistently earn excess returns over a long

period of time. Even if some money managers are consistently observed to

beat the market, no refutation even of strong-form efficiency follows: with

tens of thousands of fund managers worldwide, even a normal distribution

of returns (as efficiency predicts) should be expected to produce a few

dozen "star" performers.

Technical Analysis:

Technical analysis refers to a broad range of economics, political and

psychological indicators, all which are base on notion, that pattern in security prices can

used to reliably predict future price patterns. The technical believe that the price of the

share price up and down due to the interaction of the supply and demand at the market.

They use indicators that, they believes, show upcoming shifts in the supply and demand

relationships and thus securities prices.

Fundamental Analysis:

Fundamental analysis is based on the notion that every security has and intrinsic

value. The intrinsic value of a stock based on such factors as the expected growth rate of

the company’s earnings and dividends. Since all shares are sell for their intrinsic values,

fundamental analysis look for the undervalued shares those price are out of the line with

their intrinsic value. For the fundamental analysis the annalist rely on the historical data

and current, public available information.

47

Portfolio Investment Decision:

It may seem that market efficiency implies that all investors should hold the same

portfolio and never make changes. The investor are make there own portfolio for the

conversion of the risk that regard on the individual investment. Even in the efficient

market, the risk tolerance of the investor are differ for there concept, tendency toward the

risk, ages, income level and other characteristic.

Use those tools and you try to find out the market related risk and also assume the return

that you want to invest at the market as an investor. You also find the efficiency of the

market or the risk of the particular share those you want to invest.

Mr. Masum: “but how I measure the risk and return for a particular share that I want to

invest? “Suppose you want to invest at the Square Parma shares at the secondary market

before you enter the market as the investor you may find out the average and the annual

market value of the share and also calculated the higher and lower price at the market and

also speculation the future price of the share if the market is efficient.” You also find out

the average return of the market price of the share and the risk using the statistical tools

like the mean and the standard deviation (∂) for the risk. For the investor the process is

mostly important.

(For the average monthly marketable return you may calculated by it), for the

risk calculation use the standard deviation (∂) =

Mr. Masum, if we go through this process and analysis may we reduce our investment

risk at the investment market. And your information and guide provide me the knowledge

and the forecasting help me aware about the market. After the collapse of the market its

push me far way from the investment. In 1996, without knowing the market policy the

rules and regulation I went at the market for that just like other investors I also become

the worse-off, but the investor like you how all time analysis the market for the tools of

the investment they become the better-off. All the information those you provide me as

the information those become the learning process for me about the market. You also give

the information and the policy before the collapse and after the process how the

government and exchange commission take the roles and for stop the illegal operation

48

and other unwilling force by investors. It also inform me that exchange take the limit of

the falls and up of the share by the Circuit Breaker System and also use the electronic

base transaction system and also limited the BO account and stop the crab market and

also monitor the investor movement those can survive the stock market after 1996 and it

influence me to invest again because the new policy and the safety protection by the

exchange commission.

Question:

1. Now regarding of the above case what you think? What is the lack of the 1996 market

that leads to the disaster? Find out according your judgment.

2. Compare 1996 & today’s market which market has more control by Dhaka stock

exchange?

3. Is their any short of lack in today’s system which can lead today’s market as like 1996

market? Give your suggestion regarding your findings

Bibliography:

1. Dhaka Stock Exchange Library

2. www.wikipedia.org

3. Contempory Investment: Douglas and Ziama

4. Financial Management: Van Horn

5. Fundamental of Corporate Finance: Ross, Westerfield, Jordan

6. Market Efficiency, Time-Varying Volatility and Equity Returns in Bangladesh

Stock Market (article): M.Kabir Hassan, Ph.D., Anisul M. Islam, Ph.D.,Syed Abul

Basher

49

Market Index:

1-Oct-96 1688.87 2-Nov-96 3157.46 1-Dec-96 3012.97

2-Oct-96 1726.53 3-Nov-96 3362.10 2-Dec-96 2921.70

3-Oct-96 1786.27 4-Nov-96 3587.69 3-Dec-96 2786.18

5-Oct-96 1890.36 5-Nov-96 3648.75 4-Dec-96 2718.90

6-Oct-96 2005.25 6-Nov-96 3415.55 5-Dec-96 2667.16

7-Oct-96 2087.33 9-Nov-96 3311.90 7-Dec-96 2618.35

8-Oct-96 2087.34 10-Nov-96 3235.09 10-Dec-96 2619.47

9-Oct-96 2067.63 11-Nov-96 3272.91 11-Dec-96 2037.85

10-Oct-96 2024.43 12-Nov-96 3358.66 12-Dec-96 2656.65

12-Oct-96 1934.41 13-Nov-96 3448.88 14-Dec-96 2670.80

13-Oct-96 1813.94 14-Nov-96 3567.27 17-Dec-96 2690.15

14-Oct-96 1793.59 16-Nov-96 3627.02 18-Dec-96 2661.61

15-Oct-96 1916.02 17-Nov-96 3595.94 19-Dec-96 2587.25

16-Oct-96 2025.18 18-Nov-96 3486.88 21-Dec-96 2514.15

17-Oct-96 2101.17 19-Nov-96 3390.92 22-Dec-96 2457.66

19-Oct-96 2116.96 20-Nov-96 3298.05 23-Dec-96 2375.38

20-Oct-96 2135.43 23-Nov-96 3323.59 24-Dec-96 2319.64

21-Oct-96 2128.13 24-Nov-96 3368.04 26-Dec-96 2269.51

23-Oct-96 2137.39 25-Nov-96 3317.58 28-Dec-96 2241.83

24-Oct-96 2193.80 26-Nov-96 3217.68 29-Dec-96 2261.47

26-Oct-96 2263.87 27-Nov-96 3124.12 30-Dec-96 2300.15

27-Oct-96 2328.51 28-Nov-96 3033.37

28-Oct-96 2464.48 30-Nov-96 3064.99

29-Oct-96 2633.51

50

30-Oct-96 2823.63

31-Oct-96 2986.29

51

3.7. Concept of Technical Analysis:

The second phase of my topic is “Impact of the Technical Analysis”. The technical

analysis is the study of market action, primarily through the use of charts, for the purpose

of forecasting future price trends.” In its purest form, technical analysis considers only the

actual price behavior of the market or instrument, based on the premise that price reflects

all relevant factors before an investor becomes aware of them through other channels. The

technical analysis is the process of provide the information of the security market

behavior of chat where the chat contain the entire past price related information and

analysis for the future movement of the market. The technical analysis construct by the

individual investors for the interested securities or the average made by the broker house

for their offered portfolio toward the customer. The analysis also has the positive impact

at the stock market movement for the specific industry of specific stock by the interest

group or the brokerage firm.

Before analysis the topic we first analysis our investors and other relevant matter those

make technical analysis more applicable at Dhaka Stock Exchange. Because their

behavior mostly highlighted at the security and stock market movement.

a) Educational Background.

b) Tendency of the risk taking.

c) Capability of holding the stock. (Individual Economical

Position.)

d) Capability of analysis market related information.

e) Movement of the Economical indicators and their position.

Regarding those factors of an investor are mostly related with the market and also have

the relation with market behavior.

But implementing the technical analysis at the market we assign an efficient market for

the investors first. Where we have the frequent movement of the information like the

daily quote and other relevant information those are come from the reliable source and the

information have the strong relation among the topic or our specification. Technical

analysis relies on published market data, primarily price movement data, to predict the

52

short term direction of individual stock or the market as a whole. The emphasis on the

internal factor that helps to detected the demand and supply condition of the market.

Before we discuss the topic at the topic analysis part first we provide some the

information about Technical analysis and its trends in broader manner. And that

information keeps overview about the technical analysis.

3.8. About the Technical Analysis:

The use of the specific market data for the analysis both aggregated stock price and

individual stock prices.

Martin J. Pring States That, “The technical approach is essentially a reflection of the idea

that prices move in treads which are determined by the changing attitude of investors

toward a variety of economic, monetary, political and psychological forces. The act of

technical analysis – for it’s an art is to identify trends changes at an early stage and to

maintain an investment posture until weight of the evidence indicates that the trend is

reserved.”

3.8.1. The following points summarize technical analysis:

a) Technical analysis is based on published market data and focuses on the internal

factors by analysis movement in the aggregate market, industrial average, or stick.

In contrast, it also analysis the economic and political factors, which are external

to the market itself.

b) The focus of the technical analysis is on identifying changes in the direction of

stock prices which tend to move in trends as the stock price adjusts to a new

equilibrium level. These trends can be analyzed, and changes in treads detected,

by studying the action of price movements and trading volume across time. The

emphasis is on likely price changes.

c) Technicians attempt to assess the overall situation concerning stocks by analyzing

technical indicators, such as breath of market data, market sentiment, momentum,

and other indicators.

Before adopt the technical analysis an investor should have the information or the overall

knowledge about the –

53

a) Economical Analysis.

b) Sector Analysis.

c) Company Analysis.

3.8.2. Frame work of the technical Analysis:

The technical analysis can applied to both aggregate of price and the individual stocks. It

includes the use of graph and technical indicators. The price and volume of the share or

the security transformation is the primary tools for the pure technical analysis. And the

graph is the most important mechanism for display this information. The technical of the

technical analysis believe that –

‘The force of the supply and demand result in particular patterns of price behavior.’

Because the movement of stock price reflected by the change of the supply and demand

of the stock at the market. Technician always move with concern of the economical

theory. For this manner overall market of the specific security has the position of the up

and down.

Time Movements in

The Aggregated Market Individual Stock

By assessing change

in prices through

Technical Analysis Chart

54

For a technician uses the movement of the price as the raw material for presenting the

information as graph. Volume data are used to estimate the general condition in the

market and to help assess its trend. The evidence seems to suggest that rising stock prices

are usually associated with rising volume. If the price rose but the volume activity did not

keep pace, technicians would be doubtful about the upward trend. A downward

movement forms some pattern or holding point accompanied by heavy volume would be

taken as a bearish sign.

3.8.3. History of Technical Analysis:

The principles of technical analysis derive from the observation of financial markets over

hundreds of years. The oldest known example of technical analysis was a method used by

Japanese traders as early as the 18th century, which evolved into the use of candlestick

techniques, and is today a main charting tool. Dow Theory is based on the collected

writings of Dow Jones co-founder and Editor Charles Dow, and inspired the use and

development of modern technical analysis from the end of the 19th century. Modern

technical analysis considers Dow Theory its cornerstone. Many more technical tools and

theories have been developed and enhanced in recent decades, with an increasing

emphasis on computer-assisted techniques.

3.8.4. Principle of Technical Analysis:

Technicians say that a market's price reflects all relevant information, so their analysis

looks more at "internals" than at "externals" such as news events. Price action also tends

to repeat itself because investors collectively tend toward patterned behavior -- hence

technicians' focus on identifiable trends and conditions.

3.8.5. Cross relation with technical analysis and other method:

John Murphy in his book "Technical Analysis of the Financial Markets” says that the

principal sources of information available to technicians are price, volume and open

interest. Other data, such as indicators and sentiment analysis are considered secondary.

However, many technical analysts reach outside pure technical analysis, combining other

market forecast methods with their technical work. One such approach, known as Fusion

55

Analysis overlays fundamental with technical analysis, in an attempt to improve portfolio

manager performance. Another advocate for this approach is John Bollinger, who coined

the term Rational Analysis as the intersection of technical analysis and fundamental

analysis.

Technical analysis is also often combined with quantitative analysis and economics. For

example, neural networks may be used to help identify inter market relationships. A few

market forecasters combine financial astrology with technical analysis. Chris Carolan's

article "Autumn Panics and Calendar Phenomenon," which won the Market Technicians

Association Dow Award for best technical analysis paper in 1998, demonstrates how

technical analysis and lunar cycles can be combined.

Investor and newsletter polls, and magazine cover sentiment indicators, are also used by

technical and market analysts.

3.8.6.Difference between the technical & fundamental analysis:

The technical analysts have believed on the market data. Because they thing the

information those need for the analysis, market is the best place for collection. They deal

with the basi economical theory supply and demand of the stock and try to find out the

relationship or the gap of the trade among the transaction of the security. Where the

fundamental analyst deal with the profit earnings ratio, sales volume, cost management,

asset management, liquidity ratio and other ratio calculation for find out the ratio analysis

result for the valuing the market position of the organization then take the decision for

investment.

Fundamental analyst takes the information from the annual report or some source for

analysis the organization. But reliability of the information depend on the source hand

means the organization. If the organization hide the information or ignore any analysis the

fundamental have the different result at the investment. But the technical analysis

interpreted the information those are grab form the market as the source like the daily

stock market quote. And the technicians have the risk that associated with the political

and economical risk.

56

3.8.7. What knowledge investors have for implementing the technical

analysis?

Technician always work on the market related information those are generated from the

daily transaction. They technician work on the trend of the data and store the past data for

predicted the future outcome of a specific stock or the security. The technician collect the

information of the security form the paper or from the related website those provide daily

information base on the date, opening price, low price, closing price and also provides the

volume of the stock trades at the market.

The technician always work of predict the information in the form of graph for the

specific stock or market as all. For that the analyst take the computer base software

solution for the forecasting the information of the market. They take information of

overall market price for make a graph and also demonstrating a graph for their interested

security. And compare the overall market data with the interested security and also find

the gap of the trade between the previous transactions.

They create a concept –

a) If the price of the share increase at the market and also the volume of the trade

also increase due to the change means the market is Bull Market.

b) If the price of the share increase at the market and the volume of the trade have

the negative means the market is Bear Market.

Implementing the technical analysis a investor should have the knowledge about the –

a) Economy / Market Analysis: For a technical analysis a technician must have the

knowledge about the relevant economical effect those have strong relation with

movement of market. And technician also has the knowledge about the

economical indicators those are mostly influence at investment market.

The technician also has the knowledge about the business cycle. The business

cycle reflects movements in economic activity as a whole, which comprises many

divers part. And the technicians also have the information about the global

perspective of the market. And have the strong ability to analysis the stock market

behavior and mach the business cycle behavior with the market trends.

57

b) Sector Analysis: the technician has the knowledge about the sector base analysis.

The knowledge helps him to selection the right and profitable stock at the market.

And it also helps them select the upward treading stock form the selective

industries. And the selection of the industries for the investment also helps them

hold the security for the long run. And the market movement also influence by the

industrial development. And also have the knowledge industrial life cycle. This in

its simplest form consists of the pioneering, expansion, and maturity stages. The

technicians also have the knowledge of qualitative analysis of important factor

influence / affecting industries.

c) Company Analysis: Technical analyst also has the knowledge about the company

analysis. The company analysis helps the technician about the financial position of

the organization.

3.8.8. Impact of the technical analysis:

Before inside the topic analysis we provide some view about the technical analysis those

help us to analysis our investors behavior and also help us to analysis the “impact of the

technical analysis.” Or contest of Dhaka Stock Exchange.

Before we analysis the topic first we try to find the information about the market base on

our investor behavior, there education level, knowledge of fundamental term of the

technical analysis, and some internal and external factor those mostly influence our

technical investor toward the market.

Analyzing the investor for the technical or the fundament analyst, first we analysis our

investor background and their technique for implementing the strategy at the market for

higher the profit for their portfolio.

Basically we classified our investor concernment toward the market and segmented them

in two parts.

a) Technical Analyst.

b) Fundamental Analyst.

58

Both the team has our influence able elements like –

a) Risk Taking Tendency.

b) Level of the education.

c) Market analysis capability base on the fundamental &

technical analysis.

d) External & Internal Factor.

For apply the technical analysis at the market the investors should have some facilities

those are mostly applicable by the security & exchange commission with help of the

government and reinforce some efficient flow of economical and informational

development that help our interest investors to implement the technical analysis at the

market.

a) Constancy of the economical order at the market/ nation.

b) Balance movement of the monetary among the member organization.

c) Security & Exchange Commission also auditing the member organization

balance sheet and other relevant document for finding the hidden mechanism

take by them for make illegal work for make the organization more acceptable

to the investor.

d) Protect the information from the misinterpretation by third party.

e) Create a high way for the information that assists the investor and the

exchange commission to have the principle of the EMH.

f) Involve more media and interest organization for evaluating the individual

organization or industry by the credit rating agency and quoted them with

grade.

Basically our investor’s behavior is combining with rational and emotional. And the

investor have the low capability for predict the market indication or the move occurred by

the market. Before implementing the technical analysis by the investor they have the clear

view of the market related information and have the capability to realize the market

change. They have the capability to understand the economy of the nation and understand

the economy of the firm which has relation with business cycle of the organization which

59

mostly reflects the development of the organization. The technician also has the concept

of the company analysis. The technician also analysis the organization using the

fundamental instrument for valuing the organization. The technician has the proper

knowledge about the EMH. The technical analysis mostly depends on the market related

data and it will be possible if the market at the efficient manner. And the information

abandon of the information help our investor to invest at the market.

For find out the implementation of the technical analysis at the stock exchange by the

investors we operate a survey. At the survey we find that our investor invests at the

market for a specific share or the interested industry base on the market related

information. Because our investors are rational investor and level of the knowledge for

evaluating the target organization base on the fundamental analysis is less. For that reason

most of our investors are looking for the information of the exchange index and the daily

quote. Information becomes the main force to our investor for investment. And we need

to implement the efficient market environment where the information are available and

the analysis basically understand the upcoming scenario of the market for the past data

analysis. And our stock exchange commission also provides the information and other

related instrument at their website and more emphasize on the technical investor to

calculate the market tread.

Basically Dhaka Stock Exchange Provide the market updates for the investors that

investors are able to analysis the information and take the next strategy for hold or sell the

stock. And this also helps them to take the strategies for hold or selloff the shares. And

exchange provide the information of the industries those also help them to analysis the

market. And the impact of the technical analysis is implacable if the all the channel of the

information provide right information and the technician are management data to create

their own chant for the industry.

Base on the survey we also find that our investor always looking for the market

information and they always avoid the fundamental analysis. Our investors are not having

institution education for analysis the organization base on the fundamental concept. For

60

that our investor always looks for stock exchange data. It only possible, if we manage an

efficient market where the information is the main instrument toward the investors.

For analysis the topic more specifically we analysis the market related data like the

market price of a target organization and arrange a calculation through computer added

software for understand the effect of the technical analysis with the evidence of EMH.

The presenting graph shows the technical analysis factor of AB BANK. The investor

collected the 10 (1996 – 2006) year market price of the AB BANK stock and generated

the graph for the technical analysis of the bank. And the technician also compare the AB

Bank Stock price for the past data and compare the data with the belonging industry and

compare the relative growth of the stock with the industry as whole.

61

Figure – 7:

The technical analysis deals with the past data and predicting the future movement of the

market. And the technician also uses the computer and simple MS Excel for analysis the

result for this expected organization future movement. But its take time for a technician

for collect the data base on the target organization. Because our exchange not efficient to

manage the daily price of the stock at their data bank. And the technician always depends

on the market price for their target organization before they move for the investment. The

technician also has the different assumption from the fundamental analyst. Fundamental

analyst deals with accounting matter but the technician deals with the market relevant

instrument for analysis their target organization. It only possible if the market have the

EMH and exchange have control on this to provide real data for analysis the concept.

The graph construct on the information that generated by DSE. The graph presents the

market information of the AB Bank Limited. At the analysis the graph we arrange the

data according to data, opening price, high price, low price of the day and also take the

volume of the trading. As an investor of the AB Bank an investor keeps all the market

data from 1996 to 2006 and the investor manage a technical analysis by himself through

the computer. For analysis the market price of the share an investor look on –

a) Daily market price of the AB Bank shares.

b) Looking on the market related behavior.

c) Economical Factor Create by the government, political organization and

change at the policy by the Security & Exchange Commission.

62

d) Understand the firm economy.

e) And have the capability to understand the future picture of the market.

For analysis this factor a technician makes the decision for hold or sales the shares for at

the market for earning a good profit. But at Bangladesh the investors have the lack of

knowledge about the share trading policy and lack of the interest firm for provide the

technical analysis (Graph) for the investors. As make the point more specific –

Yahoo have its own finance department to produce the technical analysis (Graph) for the

individual industry of the specific organization that investor have the analysis result from

their website (www.finance.yahoo.com) and invest at the target industry for earn the

profit. Yahoo also provides the moving average for the specific organization. And the

moving average is part of the technical analysis. It provides technical analysis (Graph) of

short time like the 50 days or 200 days. And the moving average provides that

information which actually executed before.

But at our nation we don’t have this kind of website to produce the technical analysis for

our investor and the investor get the information for the site and predicted the information

for their own. And it also impossible to implement at our Dhaka Stock Exchange for the

investor –

a) Lack of education from the investors.

b) Lack of internet access and the volunteer organization for produce the

expert analysis for the investors.

c) Higher price of the communication.

d) Only depend on the own capability of analysis the market or by the broker

house.

e) Mainly depend on the market related information and make their trades on

the market related information before applied any kind of analysis.

Form the survey we find that at the recent trend the financial institution and mutual fund

industry doing good. It only possible through our investors because the industry have low

risk and the investor are influence by their reliability on them and also influence by the

63

market information. It contain on instrument of the EMH. But Analysis the topic more

specifically and base on the behavior of the stock market recently we find that investor

become more aware and stock exchange authority provide more facility and other

procedure to protect the interest of the investors at the stock market. But the technical

analysis is widely used by the member organization to provide their relative strength

among the industries. They use the technical analysis for present the market price of the

share in at the aggregated form. But rest of the part of the annual report are valuating base

on the fundamental analysis. But we have some problem on that some of our investor who

have the institutional background about the valuation and rest of the investor of the

specific organization quite to understand. For that most of our investors are invest at the

market base on the market mechanism or influence by the friend or other person for

invest. And they also have the problem for hold the stock.

a) Economical conditions from investors also create impact for holding the

security.

b) Level of Education.

c) Have the tendency for holding the stock for a short span.

Those factor are mostly affected the implementation of technical analysis at Dhaka Stock

Exchange. Analysis the impact of the technical analysis, we combine our first phrase

“The Stock Market Behavior” have some of the information or the instrument those are

also influence other factor related with technical analysis.

In the trend of the third world economical nation we have the devastative improvement at

information technology and the exchange also develop the laws and other facilities to

provide a perfect investment place toward the investor that investor secure on the term of

the risk. After the 1996 bubble stock exchange commission improve the laws and bring

the technological improvement at the market stock market and they introduce the modern

information technology to protect the investor’s interest at the market as whole. The

commission looking for adopting the EMH at the exchange that assist the investor to have

the fair market base on the information. After 1996 Bubble there were no new bubble take

place due to the lack of the market information. But the market has some of crush due to

change of the political power, economical factors, and natural factors. But those are the

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influence matter of the technical analysis and the factors those influence the

implementing the right presentation of the future. But all of those substances the market

have the perfect position to implement the technical analysis.

But the implementation of the technical analysis at exchange is more positive and

effective to investors then the fundamental analysis. Most of our investors are the rational

investors and the lack of the evaluating knowledge base on the fundamental analysis give

them an obstacle to invest at the market without the analysis the financial position of

target organization. For that the technical analysis is the most effective for analysis the

market condition.

Before we find the impact of the technical analysis at Dhaka Stock Exchange, we try to

find some evidence those associated with our investment market by our investor. Before

find the evidence we test our stock market with the technical analysis strategies those

taken by our investor. We testing the technical analysis strategies base on –

Figure – 8:

And the technical analysis also has the challenge of the EMH. At the efficient market all

test are set place virtually and the provider data are regarded for the weak form of the

market and the weak form market information give the strong position of the future

trategies

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prediction of the stock. And the EMH provide the evidence against the technical analysis

that hold the stock price changes across time are dependent and that price of the stock

move in the trends. And it’s also adjusted some superior risk adjusted return after all

relevant cost has been deducted.

But the test strategy of the technical analysis mostly depends on the strategy taken by the

investor for their respective stock. They combine their strategy base on the active or the

passive investment strategy. Our investor has the problem to make their strategy to

protect the stock from the market decline. And the problem also associated the

involvement of the hidden risk and lack of predictability of the market information keep

the investor far from the investment market. And it’s the obstacle point of testing the

technical analysis at contest of Bangladesh Security Market.

Because market is efficient and the investors are not upgrade themselves with the

knowledge of the modern investment concept. It’s one of the obstacle points for

implementing the technical analysis at Dhaka Stock Exchange. But the market has the

EMH effect and the evidence also provide the support toward the investors for applying

the technical analysis at exchange.

Index Effect:

The index also bring an effect at the investor mind about the importance of the market

and the index also provide the information about the market position or market

effectiveness that provide the efficiency of the market toward the investor or the

interested group. DSE have two types of index’s for the forecasting the market position

toward the investor. The index is –

a) DSE General Index’s

b) DSE Top 20 Index’s

The index also creates an impact at the stock exchange. And the effect also proved by the

recent trends that take place at DSE. The recent time the market index jump to 2400 basis

point and the DSE 20 index hit the heights point it ever touches as the emerging market.

Which are the emerging achievement by our stock exchange and the market also have the

influence by the continuous investment of the investors and listed organization also coup

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up with policy and the technique of DSE to make the market more investment able for the

investors. And the index effect also widely used at the world stock market for prevailing

the efficiency of the market.

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4.1. Analysis the investors and the member organization:

At the chapter – 3, we analysis the topic base on the behavior science, economical

theories and combination of the financial, investment & portfolio management theory.

But our main instruments of our topic are protecting the investor and the listed

organization from the volatility of the market. at chapter – 3 we analysis the topic most on

the adaptation of the economical theory of demand and supply, most influence able micro

and macro factor those have the positive impact at the growth of the overall market.

These chapters contain the investment theory like the efficient market hypotheses,

industry valuation technique, fundamental analysis and the most limelight topic of our

research technical analysis. at the topic analysis we analysis the investors and the listed

organization under DSE and coupe up our analysis base on the risk and other effecting

factors influence the change of the market behavior. But at the point we discuss the topic

only on the theory of the finance and economics. But make the topic more strong and

relevant to protect our investors and listed organization form the coming volatility at the

market we try to find the SOWT analysis for our investor and listed organization.

Analysis the SOWT and compare their sustainability at the market with change of any

economical or financial factors. We also analysis our investor and listed companies

comparative strength those are related with the porter’s five forces model.

Investor analysis base on the SOWT -

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4.1.1. Investor Analysis:

4.1.1. A. Strength:

Strengthen of an investor mostly depends on the market position. And the market positions are

influence through the political, economical psychological and other relevant influencing matter

those are influence and help the investors to retain profit from the market. And strengthens on an

investor also depend on the taking strategy of the investor should take regarding the market. And

the strength for the investor is –

a) Several choices for investment.

b) Full of information.

c) Bargaining power.

d) Rules and regulation take by SEC for protect the interest of

the investors.

e) Wide development of information technology and the

adaptation also help the investor to invest at the market.

4.1.1. B. Opportunities:

The capital market is the place for earning high or low amount of profit. The market is the places

where the opportunities are hidden and perfect investor are finding the opportunities and use the

opportunities for make profit double for him. And opportunities for and investor is coming

through –

a) Use the analysis method to evaluating the stock.

b) Change at the political and economical factor of the nation

bring an opportunities toward the investors.

c) Industrial movement like the industrial boom is the great

opportunities for an investor.

d) Adaptation of the EMH is the opportunities for the investor

to have the relevant information about the market condition.

And shape the stock base on the informational analysis.

e) Decrease the interest rate by the government also an

opportunities for the investor to own the money to invest at

the market at low interest paying.

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4.1.1. C. Weakness:

The weakness of an investor is created by this own. Because all investors have not the same

predication powers for analysis the market. And some of them have the super natural ability to

analysis the stock market and it’s regarding behavior. Weakness on investor also comes for its

behavior also. And the weakness on investor is –

a) Lack of the knowledge on investment market.

b) Unable to evaluating the stock for profit by its own.

c) Have the tendency to hold the stock at the crush time.

d) Limit of the investment.

e) Barriers from the SEC also weakness for investor to invest at

the market.

f) Invest all the money behind one organization in the weakness

for investor.

4.1.1. D. Threat:

The threat toward the investors comes through the SEC or by the Government. If SEC change any

laws and regulation at commission the effect also barrier by the investors and the market have the

ripple effect to decrease the market index. And threat also comes toward the investors through –

a) Rules and Regulation change by the SEC and DSE.

b) Economical Change due to the political movement, natural

calamities.

c) Barriers posted by government toward the specific industry.

d) Investment by the foreign investor at the market and at a

sudden point use Backhand mechanism also threat for

investor.

e) Unexpected movement of the price also a threat for the

investors.

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4.1.2. Listed Organization:

The listed organization also has the SOWT from the capital market. And the organization has the

entire efficient manner over the market for control. The listed organization also has their position

that influences their stock to claim a peak at the market.

4.1.2. A. Strength:

The listed organization has the strength at the market when the entire industry or the group of

industry performs well at the business. The positive growth at the industry also influences the

respective organization at the stock market. And the organization has the strength at the market

and investors are interested to by the stock of the up performing organization.

a) Industrial growth.

b) Government decision for regarding the improvement of the

industry development.

c) Corporate Social Responsibility of the organization toward

the society and the nation.

d) Movement at the development process of the industry.

e) Interest people or investors toward the industry for the low

riskiness for invest by the interest group.

4.1.2. B. Opportunities:

The market is the place for accumulated the venture capital form the investment market. Capital

market is the reliable source for the listed organization to have the venture capital forms the

investors and the bond holders for an organization. Because the market is the full of opportunities

and the opportunities are begets toward the listed organization through –

a) Change the policy and rules by the government and stock

exchange commission toward the development of the

industry.

b) The relevant growth for improvement of the industry by the

pioneer.

c) Investment by the foreign investors toward the industry.

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d) Develop a good business cycle and management process is

also bringing the opportunities toward the industry.

e) Manage the principle of the accounting and financial

management measure also bring believe of the investor

toward the industry development also an opportunities.

4.1.2. C. Weakness:

The weakness of a listed company under stock exchange begets from –

a) Mismanagement take place by the organization is give chance

toward other organization for accumulated the venture capital

from the investment market.

b) Development by the rival organization for the business plan and

other matter to capture the market also weakness for the listed

organization.

c) Misunderstanding between the management and stock holders

create problem to hold the investors for the organization.

4.1.2. D. Threat:

The threat for the listed organization come form toward them from internal and external factors of

the economy. Some strategic plan is excruciated by the organization as the betterment for them

but the strategy ample the boomerang toward the industry as threat. Some time stock exchange

takes some decision to resist the market condition form the volatility of the collapse and the

decision make a reverse effect toward the growth of the listed organization.

a) External force and the internal force.

b) Threat create by the own management policy.

c) Policy change by the rival organization and SEC support the

policy for the betterment of the organization is the ripple threat

for the rest of the listed organization.

4.1.3. Stock Exchange/ Capital Market of the Nation:

The exchange also have the strength, weakness, opportunities, threat those have the direct effect

for the investors and listed organization. And management teams of exchange always try to

coordinate the strategy of the organization to protect the capital market for the uncertain volatility

those arise for the internal factor or the external factor those are mostly influence by the economy,

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psychology, market proposition and other effect come toward them to solve the overall interest of

the investor and listed organization market.

4.1.3. A. Strength:

a) It’s only the organized capital market for the selling the bond and

stock at one place.

b) It has own management and regulatory body to control the

market by the laws and regulation.

c) The management of DSE has the right to control over the market

by its own policy and regulatory for protect the investor from the

volatility of the market collapse.

d) It has the independent body to management all the decision and

regarding market scenario.

4.1.3. B. Opportunities:

As the place on the investment they have several opportunities to boost the organization as the

icon of the investment market. Exchange has the opportunities through –

a) Implementing of the strategies at the organization to boost

the nation capital market.

b) The exchange have the opportunities to boost the capital

form the arbitration and other activities those generate the

income for them.

c) They have the opportunities to increase the importance of

the capital market and make place attractive to other for

invest. And the relevant activities for opportunities to show

the relative strength of the DSE.

4.1.3. C. Weakness:

The weakness of the stock exchange also bring toward the market by its own management policy

or the top level management feel to analysis the coming change at the market. But the weaknesses

also come to them if government forces them to change the rules at the market or the management

policy.

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4.1.3. D. Threat:

Exchange has the threat from the expending new process of management policy which required

the time for implement and change of the economical indicators are bring the threat for the

exchange. And the economical change is the big threat for DSE.

The threats are arise from –

a) Policy changed by government toward the investment

market.

b) Economical shutdown.

c) Change of the policy by the Government & SEC also brings

the threat for DSE.

4.2. Porter Five Force Competitor Model:

Analysis the investors, listed organization and exchange base on the Porter Five Forces Model.

The analysis contains all the element of the stock exchange like the investors, listed organization,

and exchange as the elements of the model and analysis the five forces base on the Porter Theory.

4.2.1. Entry Barrier For the potential Competitors (Low):

People at the third world economy have the low interest to get in the market as the

investor and the listing of the firm under the stock exchange have the low intension for

enter at the market. Because our economy become the rival for investing at the market.

And the restriction imposed by the government toward the investors is become the fact or

the entry barrier for the investors and also for the listed organization to accumulated the

capital form the market. For that reason enters of potential competitor is low.

4.2.2. Intensity of rivalry between the competitors (High):

Intensity of rivalry between investors, listed organization, and the exchange have the high

competition. The development of the information technology and the adaptation of it’s as

the media or channel of the information high way for both the investors and the listed

organization. For that all group related with the transaction have the positive knowledge

about the investment and they form a strong position of their respective place with blasé

of the information. For that capital market have the high competitiveness in terms other

place. And development the information technology base movement at the market the

exchange authority have the power to monitoring the transaction of the stock and the

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development of the new rules and regulation also assists them to hold a competitive

position at market.

4.2.3. Bargaining Power of Suppliers (High):

The bargaining power of the supplies also depends on the quality of the product and also

the amount of the product the organization consume as an individual. But the theory

present information that in the market if the number or the producer are increase and the

supplies of the raw material at in equilibrium position the supplies have the strong

position to increase the price of the product. And the concept also implacable at the stock

exchange. If the respective organization or industry shares are available at the market and

the investor don’t have interest to accrue the share at their portfolio. At the situation the

suppliers bargaining power is low. But the stock bet a good hit at the stock exchange and

the supply of the stock from the investors is low means the investor have the high

bargaining power.

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4.2.4. Threat from the substitute product (High):

The stock exchange is the place where investors will to buy and sold share which they

thing to earn the profit for the market. Different organization stock becomes the substitute

of product like the share for investment at the market by the investors. And investor mind

always work for accumulated the profit from the market and they always looking for the

alternative share which provide them high profit at the low date of the holding. And the

market has some rules and regulation for protect the investor form the market collapse

and the rules and regulation also protect the investor for the volatility of the market and

the technical investor always looking for the alternative source for generate the profit and

the exchange is only place where an investor find alternative way for investment. And

high availability of the share at the market for the several rival industries also threat for

separate or the individual organization to generate the venture capital from the market.

Bargaining power from buyer ( High): The bargaining power of the investor at the market is the main instrument for influencing

the price movement of a specific product of the shares at the stock exchange. If all the

other indicator of the economy have the right activities toward the market and the market

in the perfect position for the investment the buyer have the more relevant power at their

hand for buying the stock from the suppliers. And the bargaining power of an investor

depends on the –

a) Supply and the demand of the stock.

b) Availability of the stock.

c) Market proportion.

d) Economical indicator change by any affecting influence.

e) Policy change by the government toward and industry.

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5.1. Recommendation:

The topic deals with the capital market of the nation. Where the each movement is

important for an investor, if the movement by the exchange bring a positive impact at the

investor to increase the profit from the market means the market policy support the

investor and the investor influence through the market condition and have the intend to

invest more at the market. But the exchange also looking over interest of the listed

organization and bring barrier to protect them from the collapse and insist them to collect

the venture capital from the market by shares and bonds. But the market have some

indicating factors which are mostly influence the market to captive the investors and

listed organization interest as whole. Before the recommendation of the topic we try

bring the factors those are the obstacle for the market behavior and also create the

problem to implement the technical analysis at our respective market for the keeping the

interest of investors. And market have the rules and regulation for the keeping the interest

of investors and listed organization we also try to match the recommendation with

existing laws and other matter for protect the investors and listed organization from the

uncertain volatility.

Influencing factors at stock exchange:

Investor point of view:

a) Investor protection laws by the SEC toward stock exchange and

exchange execute the regulation for protect the investor for the

uncertain market.

b) Level of the education.

c) Financial condition of investors.

d) Risk absorbed ability of investors.

e) Ability to use or understand the information technology.

The stock exchange authority have well articulated investor protection guidance for

protect the investor for the uncertain risk those are arise at the market by the investors and

mismanagement policy take by the listed organization or the listed organization at stock

exchange also bring a problem toward the investors and also for the entire organization in

at the industry. Due to lack of the education and regarding other factor our investors far

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behind then other third world nation investor. And investor movement regarding any

stock volatility brings the change at the behavior of the stock market. For protect the

investor for uncertain volatility and keeping their interest toward the market we assign

some way to protect the interest of them –

a) Analysis the behavior of the investors by stock exchange and recommending some

suitable way to guide them for the investment.

b) Also arrange investor guide for train up our investor for meet their deserve level

of success at investment market.

c) Exchange provides the market related data as understandable format that our

investor easily understand the predication of the market case.

d) Exchange always looking checks the balance sheet and other accounting and

financial matter of the listed organization that the organization performs any

hidden technique to over valuing the stock price at the annual report to blabs

investor.

But the behavior of the market influence through economical factors and the economical

factors are associated with the micro and macro factor. If we change our economical

factor all whole we bring a well management and capitalized stock market. But the

economical condition of a nation depends on the stable political power, natural factors,

and management of the wealth distribution among the economy. And the economical

sustainability brings a suitable stock market for our investors and also influences new

organization to list under the stock exchange to accumulate the venture capital form the

capital market.

a) Bring suitable economical condition by taking the suitable policy to increase the

economical position of the nation at the world.

b) Increase the change of the investment by the local and foreign investor.

c) Influence the productivity of the nation.

d) Influence people to save the money and invest at the capital market for boosting

the national capital market.

e) Increase the GDP & GNP of the nation.

f) Manage the equality at the Balance of Payment and decrease the devaluation of

the local currency against the foreign currency.

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To have a sound capital market we also required to implement the EMH at stock

exchange by the stock exchange authority. And exchange have the control over it’s and

manage all sort of information to provide right analysis toward the investors. Analysis the

strategy of the investors, listed organization and exchange commission they create a

bridge of information and the information carry the analysis toward the investor but under

the rules and regulation of the law.

But in Bangladesh the implementing of technical analysis at the stock exchange is low

and the lack of interest by the volunteer organization for predicting the graph for the or

data for the predicting organization like the moving average of and particular industry

like the bank and insurance. But the information of the technical analysis is provide by

DSE at the news paper and as the daily stock price and interested technician

implementing the technique for their own and have the analysis of the result as their own

interest.

But it’s not proper way for analysis the market position for a specific shares or the

industry. For the implementing the technical analysis at stock exchange we have to

provide those criteria and try to fulfill the criteria by the investor –

a) Abundant of market rerated information like the daily stock price and other

relevant law and regulation take place by DSE.

b) Implementing the technical analysis at stock exchange first we create an efficient

market where the information will flow without the regulation and misinterpret.

c) Educated the investor by training and other workshop to draw the advantage and

other concept of technical analysis.

And create relation among the investor and listed organization and control over them with

the regulation from DSE. Which help the DSE from the uncertain volatility like collapse

of the market?

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6.1. Conclusion:

The report contains the topic of “The Stock Market Behavior & Impact of Technical

Analysis”. For analysis the topic we segment the topic at two phases and phases are deals

with the market behavior and technical analysis. At the topic analysis we also analysis the

market behavior base the economical factors, investor behavior, and listed firms behavior

and the policy they keep for stay at the market. And also find the influence able matter

those are mostly influence the market as the volatility. Given solve for the matter if our

investors are follow those matter and aware themselves on the recommendation factor

they may protect them from the uncertain volatility of the market. We analysis the market

with the fundamental concept of the finance and investment management. And provide

more sophisticated information to protect our investment market from the collapse. We

also provide the existing guideline and laws imply by our exchange commission to

protect market as whole. For have the sound investment markets we must demonstrated

the all training and also improve the laws and other matter to solve the market problem

and implement the efficient market for investment by the investor.

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Appendix