www.ccsenet.org/ijbm International Journal of Business and Management Vol. 6, No. 7; July 2011
86 ISSN 1833-3850 E-ISSN 1833-8119
Capital Market of Bangladesh: Volatility in the Dhaka Stock
Exchange (DSE) and Role of Regulators
Md. Tariqur Rahman (Corresponding author)
Senior Research Associate, Centre for Policy Dialogue (CPD)
House No. 40/C, Road No, 11 (New)
Dhanmondi R/A, Dhaka-1209, Bangladesh
Tel: 880-2-812-4770, 9141734 Ext-146 E-mail: rahmantariqdu@gmail.com
Khondker Golam Moazzem
Senior Research Fellow, Centre for Policy Dialogue (CPD)
House No. 40/C, Road No, 11 (New)
Dhanmondi R/A, Dhaka-1209, Bangladesh
Tel: 880-2-812-4770, 9141734 Ext-147 E-mail: moazzem@cpd.org.bd
Received: December 17, 2010 Accepted: February 27, 2011 doi:10.5539/ijbm.v6n7p86
Abstract
Over the last few years, the capital market of Bangladesh has witnessed a haughty growth which is not in line of development in the real sector of the economy. Although, the Securities and Exchange Commission (SEC) of
Bangladesh has tried to correct the irregular behavior observed in the market, very often it is argued that lack of proper and firm decisions from the regulator’s side has contributed to make the market more unstable rather than to reduce it. The paper attempts to identify the casual relationship between the observed volatility in the country’s major bourses namely the Dhaka Stock Exchange (DSE) and the regulatory decisions taken by the
SEC empirically. Using Vector Auto-regressive (VAR), statistically highly significant relationship was found between decisions taken by the regulatory authority and market volatility, although the direction of causality is in reverse order than theoretically and empirically expected. Again, though the number of decisions taken by the
SEC immediately, with longer time the response was in opposite direction than expected.
Keywords: