Trading Behavior and Investment Decision Making Process of General Investors in Capital Market of Bangladesh

Topics: Stock market, Stock exchange, Stock Pages: 20 (4729 words) Published: April 3, 2014
Chapter-1: Introduction
Capital Market mainly refers the Stock and Share market of the country. When banking system cannot totally meet up the need for funds to the market economy, capital market stands up to supplement it. Companies and the government can raise funds furlong-term investments via the capital market. The capital market includes the stock market, the bond market, and the primary market. Securities trading on organized capital markets are monitored by the government; new issues are approved by authorities of financial supervision and monitored by participating banks. Thus, organized capital markets are able to guarantee sound investment opportunities. The capital market is the market for long-term loans and equity capital. For any developing countries capital market is very important for economic growth. The securities market works as a bridge between the savings and the preferred investment across the business entities and other economic units, specially the general households that in aggregate form the surplus savings units. Especially at times when the banking sector of the country is facing the challenge of bringing down the advance deposit ratio to sustainable level, the economy of the country is unfolding newer horizon of opportunities. Due to overexposure level of the financial system the securities market could play a very positive role, had there been no market debacle. Bangladesh having its target to become a middle income country must have significant level of rise in investment, which at the present state of banking system cannot be met. The securities market could play the key role in meeting these huge investment demands if the secondary market would remain stable. The capital market also helps increase savings and investment, which are essential for economic development. An equity market, by allowing diversification across variety of assets, helps reduce the risk the investors must bear, thus reducing the cost of capital, which in turn spurs investment and economic growth. However, volatility and market efficiency are two important features which will ultimately determine the effectiveness of the stock market in economic development. If a stock market is inefficient due to insufficient informational supply, investors face difficulty in choosing the optimal investment as information on corporate performance is slow or less available. The resulting uncertainty may induce investors either to withdraw from the market until this uncertainty is resolved or discourage them to invest funds for long term. Moreover, if investors are not rewarded for taking on higher risk by investing in the stock market, or if excess volatility weakens investor’s confidence, they will not invest their savings in the stock market, and hence discourage economic growth. There two stock exchanges in Bangladesh one is Dhaka Stock Exchange (DSE) and another is Chittagong Stock Exchange (CSE). We know a large number of people are engaged with stock markets. Because, stock markets are the alternative investment sector. Although Bangladeshi stock markets are attractive, but these are not stable as foreign countries’ stock market. When stock markets are going up the individual investors invest their fund blindly without any consideration of the future market forecast. So that, when Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) collapsed 1996 and 2010 when individual investors faced financial huge lose. We have tried to know from this survey report how invertors make investment decision and what factors they consider which influence their trading behavior in capital market.

1.1 Origin of the Report:
This survey report is prepared as a requirement for Financial Analysis and Control course of BBA program at Eastern University. Our course instructor assigned us to prepare a report on “Trading Behavior and Investment Decision Making Process of General Investors in Capital Market of Bangladesh”. According to our...

References: 1. http://www.dsebd.org/ilf.php
2. http://www.cse.com.bd/mission.php#bg
3. http://www.scribd.com/doc/72464268/Capital-Market-in-Bangladesh-An-Overview-in-the-Present-Context
4. http://www.bdstock.com/
5. http://allbd.ueuo.com/list_and_address_of_broker_houses.html
Chapter-8: Appendix
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