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Submitted by:
Fuhad Ahmed
ID- B1506025
Sec-Fin (A)
Submitted to:
Dr. Mohammad Bayezid Ali
Associate Professor
Department of Finance
Jagannath University
The major stock exchange of Bangladesh is the Dhaka stock' exchange Ltd which started trading in
1956. It is a broker owned stock exchange and incorporated under Companies Act 1994. The
stocks are no longer paper stocks issued by listed companies. Now they are units of accounts
deposited with the Central Depository of Bangladesh Limited (CDBL). In other words, stocks
are electronic stocks and accounts are maintained by the CDBL which came into being by the
Security Depository Act 1999.
Bangladesh has another Stock Exchange named the Chittagong Stock Exchange (CSE). The CSE
came into being in 1995. The administrative and trading system are more or less same as that of
DSE. In some cases, CSE took the lead in bringing reforms and sophistication in the exchange
administration and trading system. The CSE is also under the demutualization process. When
both DSE and CSE are demutualized, there will be either one demutualized exchange in the
country or both the exchange can exist separately if SEC decide so.
DSE Indices
There are three categories for the DSE indexes:
DSEX:
DSEX represent the DSE all-Share Price index for the Dhaka Stock Exchange (DSE).
Trading History
The Dhaka Stock Exchange Limited introduced DSE Broad Index (“DSEX”) as per ‘DSE
Bangladesh Index Methodology’ designed and developed by S&P Dow Jones Indices with effect
from January 28, 2013. DSEX” is the Broad Index of the Exchange (Benchmark Index) which
reflects around 97% of the total equity market capitalization.
DS30:
DS30 is an index where the best thirty stocks are listed. The best thirty performing stocks
information, movement, overall information is provided here.
Trading History
DSE 30 Index (“DS30”) was also introduced with DSE Broad Index (“DSEX”) as per ‘DSE
Bangladesh Index Methodology’ at the same time. DS30 constructed with 30 leading companies
which can be said as investable Index of the Exchange. “DS30” reflects around 51% of the total
equity market capitalization.
DSES:
DSE Shariah Index (DSES) is constructed as a subset of the DSE Broad Index (DSEX) and
includes all the stocks included in the parent Index that rules- based screens for Shariah
compliance.
Trading History
The Dhaka bourse introduced the index-DSES index-that was designed and developed by S&P
Dow Jones Indices Methodology on January 19, 2014. Its target was to meet requirements of the
Islamic fund investors.
CSE Indices
There are five categories for the CSE indexes:
CASPI:
CASPI represents the CSE all-Share Price index for the Chittagong Stock Exchange (CSE).
Trading History
The only index the CSE has been maintaining since 10th October 1995 is a ALL SHARE PRICE
INDEX using Chained Paasche method. CSE finds the date 1 January 2000 is the best date to start
new index.
CSE 30:
CSE 30 is an index where the best thirty stocks are listed. The best thirty performing stocks
information, movement, overall information is provided here.
Trading History
In 2000, it was introduced, which was found to be very popular in almost all the developed
exchanges worldwide at that time. After revision in the Listing & Index Committee Meeting held
on 28th Apr 2009, two layer methods are followed for selection of listed companies in the CSE-
30 Index. In the first layer method, basic criteria are considered for primary selection. On being
qualified on the basis of the Basic Criteria, the companies are required to meet further Selection
Criteria to have the final berth in CSE-30 Index.
CSCX:
It represents the Chittagong Special Categories Index. Here all the stock except the Z category
stock are included.
Trading History
Chittagong Stock Exchange (CSE) launched a new index named CSCX (CSE Selective Categories'
Index) from 14th February 2004 to replace the earlier CSE Trade Volume Weighted Index.
CSE-50:
CSE 50 Index is constructed in order to provide an appropriate benchmark for the capital market.
The index comprises 50 leading and active stocks to ensure coverage of a large portion of market
capitalization in CSE.
Trading History
It was introduced in 2014. It was developed by India Index Services and Products Limited (IISL),
a subsidiary of the National Stock Exchange of India (NSE) and a subsidiary of NSE Strategic
Investment Corporation.
Calculation methodology
Index Calculation for DSE
The algorithm of index calculation according to IOSCO index methodology is:
controller XXX
Free-Float: XXX
All CSE indices will be calculated using following formula:
Free-float market capitalization of index constituents/ Base Market capitalization * Base Index
Value
Provisions affecting stock price
Impact of Stock and Cash Dividend Declaration
The market adjusted average abnormal returns attributed solely to the dividend announcement
day is statistically insignificant for both stock and cash dividends. Thus, it is evidence that there
are no differences in the impact of cash or stock dividend as far as the announcement day is
concerned. However, the significant negative returns for equity dividend prior to the
announcement day indicate speculative nature of the investors’ behavior. As it is with the nature
of weak form efficient market to predict the returns around an upcoming event, the rumors and
hearsay dominates the market. It is also possible that the news has been leaked out earlier
resulting in the negative effect of the event. In such a case the negative returns associated prior to
the announcement justify that the speculators are in action with negative news about the
announcement. On the other hand, positive returns for stock dividends are reported after the
announcement, indicating positive attitude during the post announcement period. The positive
returns could be attributed to the lag between the announcement day and the record day. As the
record day becomes nearer, the stock indicates some positive returns, though the length of the lag
may vary for A, B or Z categories of companies as far as the DSE is concerned. Therefore, the
investors in general shows more positive attitude towards stock dividends.
As far as cash dividend is concerned, there is no significant returns exist as a result of cash
dividend declaration.