Contents

1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 Introduction ......................................................................................................................9 Background...................................................................................................................9 Origin of the Report .................................................................................................... 11 Justification................................................................................................................. 12 Objectives ................................................................................................................... 12 Scope of the Study ...................................................................................................... 13 Time Frame ................................................................................................................ 13 Limitations .................................................................................................................. 13 Literature Review........................................................................................................ 14 Research Methodology................................................................................................ 16 Research Design .................................................................................................. 16 Sampling method ................................................................................................. 16 Survey Instrument ................................................................................................ 16 Data Collection .................................................................................................... 17 Data Analysis ....................................................................................................... 17

1.9.1 1.9.2 1.9.3 1.9.4 1.9.5 2.0 2.1

Data Analysis and Findings ............................................................................................ 18 Demographic Analysis ................................................................................................ 18 Age and Educational Qualification ....................................................................... 18 Professional Background and Extent of Investment .............................................. 19

2.1.1 2.1.2 2.2 2.3 2.4 2.5 2.6

Influential Factor behind First Investment ................................................................... 20 Main Sources of Information ....................................................................................... 21 Single Most Important Factor for Choosing the Sources .............................................. 21 Weighted Average Rating on the Reliability of the Information Sources ..................... 22 Opinion on the Sufficiency of the Stimulus Package ................................................... 22 7

2.7

Measurement of SEC's Success in Timely and Accurate Delivery of Relevant

Information ........................................................................................................................... 23 2.8 Measurement of SEC's Success in Timely and Accurate Delivery of Relevant

Information ........................................................................................................................... 24 2.9 Measurement of Existing Websites' Success in Timely and Accurate Delivery of

Relevant Information ............................................................................................................. 24 2.10 Measurement of Existing Websites' Success in Timely and Accurate Delivery of

Relevant Information ............................................................................................................. 25 2.11 2.12 2.13 Impact of the News in Media on the Investment Decisions ...................................... 25 Impact of the announcement of the Interest Waiver by the Government ................... 26 Reaction on the Govt. Decision Relating to the Investment of the Affected Investors 26 2.14 2.15 2.16 2.17 2.18 2.19 2.20 2.21 2.22 Success of the Govt. Promises to Bring Confidence in the Market ........................... 27 The Extent to which Finance Minister's Comment Can Influence the Market ........... 28 Success of Bringing Trust by Taking Actions against the Culprits behind the Scam . 28 Transactions Based on Rumors ................................................................................ 29 Success of the Role of Black Money in the Development of the Stock Market ......... 29 Impact of Expert Reviews on Investment Decisions ................................................. 30 Whether Frequent Policy Changes Destabilize the Market ....................................... 31 Summary of Findings .............................................................................................. 31 Recommendations of the Study ............................................................................... 32

2.22.1 Recommendations for the Different Bodies .......................................................... 32 2.22.2 Recommendations for Individual Investors: ......................................................... 33 3.0 4.0 Conclusion: .................................................................................................................... 34 Bibliography................................................................................................................... 35

1.0 Introduction
A stock market or equity market is a public entity (a loose network of economic transactions, not a physical facility or discrete entity) for the trading of company stock (shares) and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. Market participants include individual retail investors, institutional investors such as mutual funds, banks, insurance companies and hedge funds, and also publicly traded corporations trading in their own shares. Communication is the exchange and flow of information and ideas from one person to another; it involves a sender transmitting an idea, information, or feeling to a receiver Effective communication occurs only if the receiver understands the exact information or idea that the sender intended to transmit. Many of the problems that occur in an organization are the either the direct result of people failing to communicate and/or processes, which leads to confusion. Among the significant factors that affect the stock market is news or hype. Here comes the role of communication process, medium, noise etc. If the message is not communicated properly, it may create havoc and vice versa. This report intends to cover this interrelation between the various types of communication with the stock market and get an insight of the impact of it.

1.1 Background
Bangladesh stock market seems to be extremely volatile; the price fluctuations of this market are very high. As a result, confidence of investors in the market place fell drastically during the two bubbles-burst episodes. Market insiders said that this lack of confidence following the ongoing liquidity crisis in the market is due to lower participation of investors. This upward and downward swing is a characteristic feature of the market and is termed as stock market volatility. Most of the time, the collapse is attributed by the authority to mob mentality and negative attitude of investors. But Liquidity crisis, insider trading, placement shares, stock split, omnibus account, strong manipulation and money whitening, can also trigger a stock market crash. This most often happens when a single event creates panic in the market and investors become unsure about the future (Ullah & Kabir, 2011). As on July 24, 2011 the number of active listed companies in the two stock exchanges of Bangladesh are 270 (236 A-Category, 9 B-Category, 5 N-Category and 20 Z-Category) and 212 respectively while there are 54 companies in the OTC Market. Among those the number of mutual funds traded is 32 in both the stock exchanges and that of bond traded in both DSE and CSE is 3. The market capitalization in the two stock exchanges is TK.3, 135,133,167,493 and 9

Tk.2, 543,976,851,118 respectively. The number of B/O Account holders at present is about 3.3 Million. Among them about 0.6 million are women. In the month of June, 2011 average daily turnover in DSE was 500 crore and in CSE it was 60 crore. Again the turnover has been showing an increasing trend as it stood at Tk.1958 crore in DSE and Tk.199 crore in CSE as on July 24, 2011. Currently the following cardinal features of the stock market can be observed which are most relevant to our report: Brokers tend to trade for their commission. Rather than truly thinking about the benefits of their traders. There is no maximum ceiling of investment. This gives some party to manipulate market. When traders take loan as margin, no real asset is kept. Rules and regulations change frequently. Few companies dominate the market. BO account, that is the mandatory account opened for starting trade, is oversubscribed. Though the number of B/O Account Holders is huge in our stock market, but their education and skills in investment in stock market is not that good. The stock market was in turbulence throughout much of 2009, with the long bullish trend starting to turn grim. The bullish trend was initiated by the end of the two-year political crisis and reemergence of democracy via the December 2008 polls and was largely unaffected by the BDR Mutiny The market was heavily aided by the entrance of Grameenphone into the capital market, when the index rose by 22% over a single day on November 16, 2009. Share prices continued to fluctuate, reaching the annual high in mid-2009 before plummeting by the end of 2009, with retail investors threatening a hunger strike. The market continued to be turbulent throughout 2010, with the DSE hitting its all-time high revenue and the largest fall in a single day since the 1996 market crash, within the space of a month. By the end of 2010, it was well known that the capital markets of Bangladesh well overvalued and overheated. The central bank had taken measures to cool the market down and control inflation by putting a leash on the liquidity (www.bbc.co.uk, 2011). The conservative monetary measures adversely affected the capital market, with the market falling once on December 13 by 285 points, over 3% of the DGEN Index which stood at around 8,500 points. The capital markets suffered a second fall on December 19, with the index falling a further 551 points, or about 7%. This 7% fall in the Dhaka Stock Exchange's index on a single day was the largest fall in the 55 year history of the Exchange, surpassing the fall of the 1996 10

market crash. This fall was deemed 'normal' by analysts, who believed the market, was overvalued. Investors took to the streets with protests. Random objects like wood and papers were set on fire in front of the DSE office in Motijheel.Immediate measures were taken by the regulatory body Securities and Exchange Commission, which, together with the Bangladesh Bank, relaxed its earlier conservative measures to pacify the fall. As a result, the market ameliorated the next day by 1.9%. Within December 2010 and January 2011, the DGEN index fell from 8,500 by 1,800 points, a total 21% fall, with masterminds of the crash making about BDT 5,000 crore ($ 667 million) out of the scam. The market fell by 5% on June 12, before taking a 4% plunge on October 11, sending the market into further turmoil. The fall finally triggered small investors to go on a fastunto-death on October 16 after forming the Bangladesh Capital Market Investors' Council. Opposition politicians declared their solidarity with the protesters. The market stood at around 5,500 index points in October 2011 from 8,900 only a year ago (Wikipedia, 2011). Protests continued throughout the months, the most recent ones taking place in front of the DSE office in November 2011, with protesters sitting in throughout nights. Meanwhile the authoritative bodies including DSE, SCE, Bangladesh Bank and the minister of finance himself were making public statements on media concerning the ongoing crisis which eventually served no purpose. Their reluctant initiatives worsen the situation a lot. Investors felt helpless and become frustrated. Many of them sold their stocks desperately while others became violent. Indeed some sort of miscommunication took place there. How people interpreted the messages from these bodies to make their trade decision can be a significant topic to analyze both from financial and communicational perspectives. The purpose of the report is to measure the impact of communications by different bodies on the trade decisions of the investors in the share market during the crisis.

1.2 Origin of the Report

The report titled A Study on the Effect of Communication from Various Bodies in the Stock Market has been prepared for Mr. Rezwanul Huque Khan, Course Instructor, Managerial Communication (C-501) as a partial requirement for the course.

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1.3 Justification

In Bangladesh a huge portion of the investors involved in stock market have a very little knowledge about the market. That is why they depend on different bodies while taking decisions about dealings. So, different types of communication from various bodies have a huge impact on our stock market. We believe that a more organized communication approach towards this market can help make the market more stable and give the investors proper direction. Therefore the study has been conducted to analyze the situation. By identifying the influential bodies and their relative impact recommendations can be made which will definitely improve the recent situation of the stock market.

1.4 Objectives

The broad Objective of the report is to identify the nature of impact of communication from various bodies in the stock market. The specific objectives are as follows: To identify the reasons of communication playing a significant role in the stock market To identify the bodies whose message have impact on the market To identify the various type of communication that is in effect in the market To understand the relative impact of the bodies on the client To suggest some more effective ways of communication so that the market can operate in a better way

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1.5 Scope of the Study

The report was generated based on the opinions given by the investors of Dhaka Stock exchange. Chittagong stock exchange was not focused. Only the small individual investors were selected as they represent the majority of the aggrieved investors. Findings and conclusions are based on judgments provided by the respondents of our questionnaire which are often subjective.

1.6 Time Frame

The timeframe of the total term paper is till the end of the semester. The literature reviews deadline was 12th April, 2012. By the next two weeks we surfed through various secondary information sources available. Then we interviewed some investors of DSE, conducted the survey and finally within the given time period the report would be submitted.

1.7

Limitations
The impact of communication will mainly be of subjective judgment, not rigorous quantitative analysis of rise and fall of index price. So the report may not be effectively for any objective analysis. The data collection period was from June 01, 2012 to June 10, 2012 after the devastating stock market crash. So the perspective of the clients may be biased, affected by the very recent situation in the market. The questionnaire survey is regionally biased because the survey is only conducted in the brokerage houses located inside Dhaka. There is a high degree of variations in the available market statistics produced by different sources which often create a dilemma in determining the level of authenticity of the data collected.

13

 The sample amount is relatively small compared to the vast stock market. The capital market being an extremely dynamic one, it was often hard to have important respondents spare their time to have talks.

1.8 Literature Review

The total number of investors in Bangladesh stock market is 3.3 million. Most of these retail investors have very little, if any, experience and knowledge of a share market. Almost all of them take their investment decision based on rumor. But stock market is not a place of gambling; rather its a place of knowledge based game (Haque, The Daily Star). That is the reason why communication from different bodies is adversely affecting share market. This highly negative effect of communication on share market is the reason of interest to conduct the survey. In February 2010, with the bubble in full swing, the SEC ruled that the maximum can be lent was 150 percent of the investor's down payment. Thus, if we wanted to buy a stock worth 100 taka, we would only have to put down 40 taka of our own money and could borrow the other 60 taka (150 percent of 40 equaling 60). Such loans could not be given against stocks with P/E ratio of 50 or more. But within 5 months after this declaration, they change the margin loan for four times. Such repetitive changes in regulation communicate a felling of uncertainty and this cannot help the investors to take any productive decision. Furthermore, this made short-term investing much easier and much more prone to moral hazard problems, as more than half of the investment could be made with borrowed money. Although by this time it was clear that the market was over-valued. While the SEC had to push on break, they in a way encourage the investors to invest more in the market through their policies (The Daily Star, 2011). Wrong information from an expert can be devastating for the market. The stock exchange registration fluctuation was described as casino by a prominent economist Rehman Sobhan, director of think tank Center for Policy Dialogue (CPD) (www.ummid.com, 2011). It reflects the poor structure of the market and immaturity of the investors which may be the reason of communication having a greater impact than it is supposed to have. When the correction process of the overdue market was on the way, repeated change in policy by SEC made the volatile market more uncertain. This was the thing which showed more drastic effect than negative news (Haque, The Daily Star, 2011). The market would be more efficiently managed if the regulators had not made policy changes every other hour.

14

Although no effective communication was observed from the government body during the occurrence of the crash, after a long period of mismanagement they showed some initiatives to stabilize the market. After the announcement of the incentive by the finance minister, the stock market shot up immediately (The Daily Star, 2012). This increasing trend generates a hope within the government that the market would stabilize. The formation of committee to identify the reason of crash and the culprits behind it considered to be a good way to regain the confidence of the investors. But the ultimate result was not satisfied at all. No proper corrective actions were taken in accordance to the investigation report. Those known faces, who are suspected to be behind the manipulation and whose names came up in the investigation report, are still running the show (The Daily Star, 2011). Out of frustration to control the market the finance minister termed the market as an evil market and denied to say anything about it. But his silence communicates an even more negative message to the investors. The market index was continued to fall even after this declaration (Share News, 2011). As our capital market is highly news sensitive, it is influenced or destabilized due to statements and comments on the stock market by different individuals, institutions and organizations which come in front through mass media. To discourage wholesale comments and inappropriate actions on stock market-related issues by individuals or institutions finance ministry issued a circular that all market-related decisions that could influence the market must be discussed with the regulator. This timely step helped to make the media personnel more careful regarding the share market issues (Islam, 2012). After a long period of falling trend recently the market is more in the phase of stability. The authority is gaining confidence to some extent. Though, this process of gaining confidence consists of a series of miscommunication and then correcting that. For example- Dhaka stocks witnessed sharp gain on January 19, 2012, a day after the government withdrew its notification relating to public servants' investment in the stock market, and the key index climbed more than five per cent (Islam, 2012). Overall, the capital market is very much sensitive to statements and comments on the stock market by different individuals, institutions and organizations. So it is evident that a more constructive approach of communication is required for the better performance of this promising market.

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1.9 Research Methodology

1.9.1 Research Design

According to the findings in the literature, this study aims to inspect the possible impact of communication of different bodies in Bangladesh stock market. The purpose of the study was to measure correlations among variables. Comments of different bodies like government, Bangladesh bank, security exchange commission, media as well as big investors in the market, implementation of new rules and regulations related to share market are considered as the independent variables and buying and selling decision of investors, prices of shares are being considered as dependent variables.

1.9.2 Sampling method

The report will use both primary and secondary data. A thorough secondary study would be conducted first, along with extensive brainstorming, to find out the various forms of communications having a role in the market, influential bodies etc. Primary data would include questionnaire responses obtained by personal interview and online survey from participants who are involved in the stock market in Dhaka. Our sample size would be around 40. The population would be all the people who are engaged in share market in our country. The study particularly targets the knowledgeable personnel of stock market. So, samples would be taken only from this probability sampling method. In probability sampling method each population element is known and has an equal chance of selection. The study will be conducted only in Dhaka city due to personnel of stock market. Our sampling technique will be simple random sampling under the time and budget constraints

1.9.3 Survey Instrument

We would use various articles, website and newspaper to get the necessary secondary information. Questionnaires would permit us to gather information that cannot be found elsewhere from any secondary information such as books, newspapers and internet resources. The success of the questions would be determined by the quality and arrangement of the questionnaire itself. This is because the information we obtain would be fresh and unique. A structured questionnaire would be used in this study to collect information from the people

16

involved in share market. So, we can easily utilize the gathered information for qualitative analysis.

1.9.4 Data Collection

First, secondary information are collected to have an overall idea about share market, to identify different influential bodies, and to prepare a well structured questionnaire. Then, primary data have been collected from interview. We have tried to use data sets spanning recent times with some exceptions depending on availability. This study is mostly qualitative in nature. After data collection, necessary screening has been performed before tabulation and graphical presentation. The concerns expressed by the issuers and the investors, and the reactions of the regulators have been analyzed. Finally, based on the findings and analyses, policy recommendations have been made.

1.9.5 Data Analysis

Our planned study is a co-relational study. Correlation is a technique for investigating the relationship between two variables.

17

2.0 Data Analysis and Findings

To get an in-depth insight on the impact of communication from various bodies in the stock market of Bangladesh, we performed some descriptive analysis based on the responses from 40 respondents and collected information from a number of secondary sources.

2.1 Demographic Analysis

2.1.1 Age and Educational Qualification

Out of the 40 respondents maximum 37% belong to the 18-25 years old category. 30% of the respondents are aged between 26 and 35. That is, 67% of the respondents combined are aged between 18 and 35. 19% of the respondents fall in the category of 36-50 years old. Also, there are 14% respondents who are over 40 years old. There are no respondents who are below 18 years. Figure 1: Age of Investors ( in Years)
14% 19% 0% 37%

<18 18-25 26-35 36-50

30%

>50

From the survey we can observe that most of the respondents are adults and experienced in the stock trading. Since they are experienced, it can be assumed that their opinions and perspectives reflect the true picture of the existing situation of the stock market.

18

Maximum 63% of the respondents have completed their Bachelor degree. On the other hand 30% of the respondents have Master degree. Only 8% of the respondents received education till higher secondary. None was from category of Secondary and Below Secondary. Figure 2: Educational Background of Investors
0%
30% 8% Below Secondary Secondary Higher Secondary Bachelor 63% Marster or Above

From this data, it can be observed majority of the respondents are educated.

2.1.2 Professional Background and Extent of Investment

From the survey, it is evident that maximum 35% of the respondents work in private sector. 30% of the respondents are students. There are also respondents who are engaged in business, government service who represent 33% of the respondents. 3% of the respondents are unemployed. Figure 3: Professional Background of the Investors
3% 30%

25%

Business Private Service Government Service

8% 35%

Student Unemployed

From the data it can be seen that 97% of the traders are employed and most of them are either self employed or working in the service sector. It is also evident that students are actively participating in the share market.

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From the survey, maximum 55% of the investors have investment less than BDT 1 lac. 30% of the respondents have investment over BDT 1 lac. The rest 16% have investment over 5 lacs. Figure 4: Extent of Current Investment Amount
>10,00,000 5,00,000-10,00,000 1,00,000-5,00,000 <1,00,000 0% 20% 40%

3%
13% 30%

55%
60%

Majority of the investors in the survey are small investors.

2.2 Influential Factor behind First Investment

From the bar diagram, it can be observed that 45% of the investors started investing in the market being encourage by other investors they know. Family and Friends influenced 30% of the respondents to invest. 18% of the respondents were self-motivated. On the other hand only 8% of the respondents were inspired by media. Figure 5: Influential Factor behind First Investment
50% 40% 30% 20% 10% 0% 45% 30% 8%

18%

Family and Media Friends

Other Investors

Self

So it is evident that initially media play an insignificant role in motivating the new investors to participate in the share market. On the other hand communication from other investors plays a significant role in bringing the investors in the market.

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2.3 Main Sources of Information

It can be observed that 38% of the investors collect information newspaper, TV & internet. 40% of the respondents equally rely on brokers and different circulars as their main sources of information related to trading. And the remaining respondents are dependent on family and friends and other investors for information. Figure 6: Main Sources of Information
8% 15% 38% Newspaper, TV & Internet Broker Different Circulars on Stock Market 20% Other Investors

20%

Media plays a crucial role for investors as the main source of information, followed by other investors and different circulars. Although brokers execute trade on behalf of the investors, they are least dependent on the brokers as their main information source.

2.4 Single Most Important Factor for Choosing the Sources

It is revealed that 35% of the investors think dependability is the single most important factor for them to choose the above mentioned information sources. Availability is another important factor which is chosen by 28% of the respondents. Accuracy is given priority by 23% of the respondents and 15% of the respondents think that timelines is the most important factor to them. Figure 7: Single Most Imporant Factor for Choosing the Sources
40% 30% 20% 10% 0% 35% 15% 23% 28%

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So it is very much clear that dependability of the source of information is of utmost important to the investors. Dependable sources are most effective in making trade decisions.

2.5 Weighted Average Rating on the Reliability of the Information

Sources
On a scale of 5, various circulars on stock market is considered to be the most reliable source of information, followed by family and friend, media, broker and other investors. Figure 8: Weighted Average Rating on the Realibility of Different Information Sources (Lowest Indicates Most Reliable)
Other investors Family and Friends Various Circular Broker Newspapers, TV & Internet 3.13 2.57 1.70 2.93 2.83

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50

From the collated information in can be inferred that various circulars on stock market are the most dependable sources of information to the investors since from the previous figure it is seen that the investors choose dependability as the most important factor.

2.6 Opinion on the Sufficiency of the Stimulus Package

The survey asked the investors whether the stimulus package offered by the government was sufficient to compensate their losses. Figure 9: Opinion on the Sufficiency of the Stimulus Package
40% 30% 20% 10% 0% 35% 23% 15% 3% Completely Somewhat No opinion Somewhat Completely Agree Agree Disagree Disagree 25%

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35% of the investors think that the stimulus package is not at all enough for them to compensate their losses. 25% of them is somewhat dissatisfied with the stimulus package. 3% had no opinion. 23% of the respondents think that this stimulus package might suffice to a certain extent. 15% is completely satisfied with the decision. From the analysis, it is clear that, to most of the investors, the stimulus package from the government is supportive to a certain extent for the current situation of the market.

2.7 Measurement of SEC's Success in Timely and Accurate Delivery

of Relevant Information
The survey then moved on to asking the efficiency of the communication of different bodies in the stock market. First, the survey focused on measurement of SECs success in timely and accurate delivery of relevant information to the investors. Maximum 35% of the investors strongly believe that SEC fails to communicate the required information in a timely fashion with them. Also, 30% of them believe that SEC's might be somewhat unsuccessful in delivering the right information on time. On the other hand, only 10% believe that SEC has succeeded and 20% believe that it has succeeded only to a certain extent. 5% conveyed no opinion.

Figure 10: Measurement of SEC's Success in Timely and Accurate Delivery of Relevant Information
40% 30% 20% 10% 0% Completely Somewhat Successful successful No opinion Somewhat Completely Unsuccessful Unsuccessful 10% 20% 5% 30% 35%

The survey reveals that there exists a serious lack of reliability on SEC regarding delivery of information on time.

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2.8 Measurement of SEC's Success in Timely and Accurate Delivery

of Relevant Information
By contrast, 60% of the respondents believe that media (newspapers, TV & internet) has been somewhat successful in providing the investors with the right information on time. Only 13% believe that media has been completely successful in this regard. 10% and 15% of the respondents opine that media is somewhat unsuccessful and completely unsuccessful respectively. 3% has no opinion. Figure 11: Measurement of Media's Success in Timely and Accurate of Delivery of Relevant Information
100% 50% 0% Completely Somewhat No opinion Somewhat Completely Successful successful Unsuccessful Unsuccessful 13% 60% 3% 10% 15%

From the analysis, it can be realized that investors regard media as a highly reliable source. Most of them trust the information from media.

2.9

Measurement of Existing Websites' Success in Timely and Accurate Delivery of Relevant Information

Similarly, majority of the respondents believe that different websites and online forums provide reliable information on a timely manner. They represent a total of 66% of the investors. 25% think that these internet sources are somewhat inefficient. 8% of them consider such sources to be completely unsuccessful.
Figure 12: Measurement of Existing Websites' Success in Timely and Accurate Delivery of Relevant Information
Totally Unsuccessful No opinion Totally Successful 0% 10% 3% 18% 20% 30% 40% 8% 25% 48% 50%

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Unlike SEC, these websites and forums are also efficient in supplying adequate information on time.

2.10 Measurement of Existing Websites' Success in Timely and

Accurate Delivery of Relevant Information

The survey reveals that investors are somewhat divided on brokers' efficiency in providing accurate and timely information. 33% completely agrees on brokers' efficiency. 28% somewhat agrees while the remaining 40% disagrees on this matter. Figure 13: Measurement of Brokers' Success in Timely and Accurate Delivery of Relevant Information
Completely Unsuccessful No opinion Completely Successful 0% 15% 25% 28% 33%

0% 5% 10% 15% 20% 25% 30% 35%

From the survey, no decisive opinion can be formed about the brokers' efficiency.

2.11 Impact of the News in Media on the Investment Decisions

Next, the survey asked the investors whether the news of the widespread protest and vandalism by the shareholders on several media have in their immediate investment decisions then. 65% of them thought that they would not invest in the market. But 10% say that nevertheless they were optimistic about the market. 25% of them think that such news did not have any influence in their immediate investment decisions.

Figure 14: Impact of the News in Media on the Investment Decisions

None Negative Positive 0% 10% 10% 20% 30% 40% 50% 60% 70% 25% 65%

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It is clear that news of widespread protest and vandalism creates a psychological impact on the investors.

2.12 Impact of the announcement of the Interest Waiver by the

Government
After the share market crash, government announced 50% interest waiver for the aggrieved investors. The next question of the survey attempted to gauge the extent of influence of direct communication from the influential bodies existing in the market.When asked if such announcement caused any change in investors' share price, 65% say that share price increased while the other 20% suffered from a decline in share price. The value of the investments of 15% of the respondents remained unchanged. Figure 15: Impact of the Announcement of the Interest Waiver by the Govt.
100% 50% 0% 65% 20% 15%

Share Priced Share Price Share Price Increased Decreased Remained Unchanged

The survey reveals that such announcement can have a direct impact in the minds of the investors and eventually, in the stock market.

2.13 Reaction on the Govt. Decision Relating to the Investment of the

Affected Investors
The survey asks the investors whether they agree with the governments' decision of letting the affected investors invest newly in the market. Almost 56% of them agree with government. But around 43% of them cannot agree with the government.

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Figure 16: Reaction on the Govt. Decision Relating to the Investment of the Affected Investors
30% 25% 20% 15% 10% 5% 0% 28% 28% 20% 3% 23%

It can be realized that the general investors welcome such positive measures from the government after that debacle in the stock market.

2.14 Success of the Govt. Promises to Bring Confidence in the Market

The survey proceeded to ask further on the success of bringing confidence through the promises made several times in the market. 58% of the respondents think that government failed severely to restore confidence in the market because of failure in keeping the promises. 8% believe that it is somewhat unsuccessful. On the other hand a total of 36% believe that government might be successful in bringing confidence among the investors. Figure 17: Success of the Govt. Promises to Bring Confidence in the Market
Completely Unsuccessful Somewhat Unsuccessful No opinion Somewhat successful Completely Successful 58% 8% 0% 23% 13% 0% 10% 20% 30% 40% 50% 60%

Failure in keeping promises can be hazardous for keeping the confidence intact among the investors.

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2.15 The Extent to which Finance Minister's Comment Can Influence

the Market
The respondents strongly believe that influential personality in the market must be very much conscious of what they say about the market. Because when they are asked whether the comments like "I don't understand share market" or "Bangladesh's share market is an odd market... Whenever I reply to something, it affects the market. It is not possible to give a reply" from Finance Minister can influence the stock market 71% of them consider that such comments can highly manipulate the market. 23% believes that such comments might have an impact on the market while the remaining 6% does not assume any impact. Figure 18: The Extent to which Finance Minister's Comment Can Influence the Market
6% 23% Completely Somewhat 71% No Effect

2.16 Success of Bringing Trust by Taking Actions against the Culprits

behind the Scam

The investors also think that the government must take stern measures against the culprits behind the scam in order to restore trust in the market. They are divided on the success of the government in bringing back the trust. 45% of them believe that such measure would be completely unsuccessful in brining the trust back while 56% think that those would be successful to restore confidence.

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Figure 19: Success of Bringing Trust by Taking Actions Against the Culprits behind the Scam
28% 45% Completely Successful Somewhat successful No opinion 0% 28%

Since majority believes that the above mentioned steps might bring trust in the market , the government should continue to ameliorate proactively by taking similar actions.

2.17 Transactions Based on Rumors

The survey moved another step to measure the frequency of transaction based on rumors. 71% of the investors reveal that they sometimes make trade decisions based on rumors. 15% of them frequently trade believing the rumors and 14% always ignore the rumors before making trade decisions.

Figure 20: Transactions Based on Rumours

80% 60% 40% 20% 0% 71%

15%

14%

Often

Sometimes

Never

Since majority of the respondents sometimes transact based on some rumors, the authority should have rigorous checking on the dissemination of such rumors which can eventually affect the entire trading a great deal.

2.18 Success of the Role of Black Money in the Development of the

Stock Market
The survey later on asks the respondents about how much successful the government policy on investing the black money in the market would be for the overall development of the situation in the market. 53% believe that such policy can be somewhat successful in developing the situation 29

in the market. 23% of them believe that such policies can be completely successful in doing so. On the other hand 23% is apprehensive of the success of such policies. Figure 21: Success of the Role of Black Money in the Development of the Stock Market
Completely Unsuccessful Somewhat Unsuccessful No opinion Somewhat successful Completely Successful 0% 23% 10% 20% 30% 40% 50% 60% 3% 53% 13% 10%

So the survey reveals that the investors want that the government should let black money be invested in the market.

2.19 Impact of Expert Reviews on Investment Decisions

53% of the investors completely agree that the expert reviews on the stock market in different media have a direct impact on the market during the crisis. 25% somewhat agrees with the given statement. 23% of them in a way disagree with the idea. Figure 22: Impact of Expert Reviews on Investment Decisions
Completely Disagree Somewhat Disagree No opinion Somewhat Agree Completely Agree 0% 13% 10% 0% 25% 53% 10% 20% 30% 40% 50% 60%

Since, it is observed that expert reviews can play a significant role in investment decisions, the concerned experts should be careful about what they tend to imply through their messages to the investors.

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2.20 Whether Frequent Policy Changes Destabilize the Market

The investors also think that the government should not change its policies regarding stock market frequently. That is why 75% of them completely agree with the statement given in the questionnaire. 18% of them also somewhat agree with it. 5% somewhat disagrees while 3% have no opinion. Figure 23: Whether Frequent Policy Changes Destabilize the Market
Completely Disagree Somewhat Disagree No opinion Somewhat Agree Completely Agree 0% 20% 40% 60% 0% 5% 3% 18% 75% 80%

So the government should be consistent in framing its policies.

2.21 Summary of Findings

Approximately, two third of the investors are aged between 18 and 35 years and have completed their bachelor degree. A majority of them are either active in business or working in the service sector. Close to one third of the investors are students. More than half of the investors have investments less than one lac in the market. They can be termed as small investors. Communication and encouragement from other investors play a crucial role in bringing the investors in the market for the first time. Family and friends also play a major role. Perhaps, their success motivates the investors to start trading. Although, investors start trading under the influence of family, friends and other investors, they are highly dependent on media, their brokers and various stock market related circulars as their main sources of information. Dependency is the number one factor that investors look when they seek information. Dependency is followed by availability and accuracy. From this it can be inferred that media is the most dependable source of information for the information. So whatever information is communicated through media is bound to have an impact among the investors. This is verified by the weighted average rating of the sources. 31

 Majority of the investors are highly dissatisfied with the communication of Securities and Exchange Commission (SEC). They think that SEC does not provide information on time. It also lags behind in delivering the most relevant and accurate information. Nevertheless, one third of them think otherwise. A different picture can be seen in case of information delivered through media and websites. More than two third of the investors believe that media and websites provide information accurately and timely. As far as brokers are concerned, the opinions of the investors are somewhat divided. Around 60% believes that brokers communicate information timely and accurately where the rest believes otherwise. Rumors and reviews by expert play a significant role in invest decisions. More than two third of the investors make occasional investment decisions based on rumors. More than half of the investors also agree that publication and broadcasting of expert reviews on the market play a crucial role in making investment decisions. As far as the overall communication and support from the government are concerned, the investors are divided. Majority of the investors are encouraged by the announcements such as the interest waiver for the affected investors. Despite that most of the investor thinks that the government is failing in bringing back confidence in the market. A larger portion of the investors urges that impromptu comments by government authorities and policies regarding validating earnings through stock market and catching the culprits of the scam are not sufficient to stabilize the market and restore confidence. In addition, three quarters of the investor believe that government should restrain itself from changing its policies frequently. Firm and consistent policies are extremely important for bringing back the confidence of the investors.

2.22 Recommendations of the Study

It is crystal clear that for the sustainable development of stock market all the parties concerned must work in a harmony as failure of any of them may lead the market to a further long decline towards a deep dark tunnel. So, we would like to suggest a few recommendations for different entities of capital market.

2.22.1 Recommendations for the Different Bodies

There is no doubt that the failure of the government and other authoritative bodies in making various decisions regarding capital market and communicating all those effectively and efficiently played role behind the recent crash which was also admitted by the Planning and Finance Minister in his different speech. Thus, the govt. should ensure the followings: 32

i) Government must oversee the appointment of skilled and capable personnel in different regulatory bodies and give punishment to the persons responsible for any kind of irregularities. ii) The responsible persons should refrain from delivering irrelevant, irresponsible and sensitive speech which many of them did before. iii) SEC must ensure that neither of its members nor any of its officials is involved either direct or indirectly with the transactions in the stock market since any message passed from them might highly influence the market. iv) DSE must ensure proper monitoring of the brokerage houses for which more skilled manpower should be appointed in the Monitoring and Surveillance Team. v) Bangladesh Bank must ensure that the Banks and other financial institutions exposure do not exceed the limit from the very beginning. vi) Institutional Buyers must show mature behavior to ensure balance in the stock market by buying shares when there is sale pressure and vice-versa.

2.22.2 Recommendations for Individual Investors:

No matter what the reason of a crash is, individual investors are the ultimate losers. Hence, it is their own duty to take care of their own money and they ought to consider the following things while taking investment decisions. i) Before investing in a particular script they must analyze the key factors of that company to justify whether the company is fundamentally strong. Such factors include EPS, P/E Ratio, NAV, future growth, industry average etc. ii) They must restrict themselves from buying junk shares and taking whimsical investment decision. iii) Instead of being traders, the retail investors need to think of being investors. iv) They should not buy on the basis of rumor or following advice of the persons who do not possess sufficient knowledge about capital market investment.

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v) They should not exhibit any violence as a natural reaction to any comments from the authoritative bodies. vi) They must know that both gain and loss are the indispensable parts of stock market. Instead of looking for gain, sometimes they must accept loss with patience so that they may recover the loss in future through higher gain.

3.0 Conclusion:
As an important part of the economy of the country, well-functioning of the capital market is a must for the industrialization process of an un-industrialized country like Bangladesh but unstability in the same may negatively affect the total financial system. Therefore, all related corners including Government, Regulatory bodies, Listed Companies, Brokerage houses, institutional investors, and retail investors should act rationally and communicate reasonably to maintain the stability in the capital market for the greater interest of the country.

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4.0 Bibliography
(2011, December 2). Retrieved 05 16, 2012, from www.bbc.co.uk: http://www.bbc.co.uk/news/15996542 (2011, 02 13). Retrieved May 18, 2012, from www.ummid.com: http://www.ummid.com/news/2011/February/13.02.2011/expert_on_bangla_capital_mar ket.htm Haque, R. (2011, February). The Daily Star. Retrieved April 20, 2012, from www.thedailystar.net: http://www.thedailystar.net/forum/2011/February/Market.html Haque, R. (2011, february). The Daily Star. Retrieved may 18, 2012, from www.thedailystar.net: http://www.thedailystar.net/forum/2011/February/market.htm Islam, S. (2012, January 31). The Financial Express. Retrieved June 21, 2012, from www.thefinancialexpress-bd.com: http://www.thefinancialexpressbd.com/more.php?news_id=96565&date=2012-01-31 Share News. (2011, June). Retrieved June 18, 2012, from www.sharenews24.com: http://www.sharenews24.com/index.php?page=details&nc=18&news_id=9425 The Daily Star. (2011, March 01). Retrieved June 12, 2012, from www.thedailystar.net: http://www.thedailystar.net/magazine/2011/01/03/cover.htm The Daily Star. (2011, November 2011). Retrieved June 18, 2012, from www.thedailystar.net: http://www.thedailystar.net/newDesign/news-details.php?nid=210510 The Daily Star. (2012, March 05). Retrieved June 13, 2012, from www.thedailystar.net: http://www.thedailystar.net/newDesign/news-details.php?nid=224990 Ullah, M. H., & Kabir, M. R. (2011). Catastrophe in Stock Market in Bangladesh. Chittagong: International Islamic University Chittagong. Wikipedia. (2011). Retrieved 05 16, 2012, from www.wikipedia.org: http://en.wikipedia.org/wiki/2011_Bangladesh_share_market_scam

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