Chapter One

1.1 Introduction
The issues of volatility and risk have become increasingly important in recent
times to financial practitioners, market participants, regulators and
researchers. Stock return volatility represents the variability of stock price
changes during a period of time. Investors, analysts, brokers, dealers and
regulators care about stock return volatility not just because it is perceived as
a measure of risk, but because they worry about excessive volatility in which
observed fluctuations in stock prices do not appear to be accompanied by
any important news about the firm or market as a whole. All investors, be they
institutional or individual, hold one common objective when they invest in the
share market; they all hope to maxim is expected returns at some preferred
level of risk. Like others emerging economys Capital market (ex-India,
Malaysia, and some Africans countries) Bangladesh stock exchanges are
consisted of vast number of inefficient investors. Most of general investors
doesnt know the even the fundamentals of investing. For investigating why
they invest in particular common stocks, not many research is known about
the causes changes in share prices except the vague idea that some
fundamental variables and other unsystematic factors affect share prices.
These create great concerns to investors and others such as stockbrokers,
fund managers and investment analysts want to invest in stocks of
Bangladesh capital market. Due to recent (during January 2010-march 2011)
increase in share price volatility in Dhaka Stock exchange, studies on share
price Volatilities have received increasing attention.
1.2 Background of the study and Research Gap
The difficulty in any empirical work examining the linkage between different
variables and stock volatility or returns lies in the setting up of adequate
controls for the other factors. For example, the accounting system generates
information on several relationships that are considered by many to be
measures of risk. Baskin (Baskin, J., (1989), Dividend Policy and the Volatility of
Common Stock, Journal of Portfolio Management, 15(3): 19-25) suggests the
use of the following control variables in testing the significance of the
relationship between dividend yield and price volatility: operating earnings,
size of the firm, level of debt financing, payout ratio and level of growth.
These variables have a clear impact on stock returns but also impact on
dividend yield.
Whether the various factors suggested by valuation theories and practices
are in fact jointly related to share price volatility is still unresolved. An
important example is a recent study by Fama and French (Fama, E. F. (1991)
Efficient capital market: II, Journal of Finance, 46, September 1575-617) which
revealed that share price returns are explained more by factors such as size

Page 1 of 20

and book-to-price ratio rather than the capital asset pricing model (CAPM)
suggested beta factors. Another related issue which has received much
coverage since the mid-1980s is the search for factors that change the values
off inns which in turn lead to changes in the share prices of firms. If these
factors can be identified, then it makes sense to consider changes in the
values of firms to have been driven by these factors. Share price volatility may
ultimately be due to changes in the values of firms arising from changes in the
fundamental factors that are associated with changes in values of firms.
Consequently, increased volatility in share prices may be a result of increased
volatility in these value-drivers. Some of these probable long-term valuedrivers are inferred from theoretical and practitioner guidelines. Recent
examples of such studies include, among others, Wilcox (1984), Rapp port
(1986), Baskin (1989) and Downs (1991) (. Baskin (1989) (Nishat, M. (1995),
Determinants of stock prices in Pakistan, International Journal of
Development Banking, 13(2): 37-42) suggests the use of the following control
variables in testing the significance of the relationship between dividend yield
and price volatility: operating earnings, size of the firm, level of debt
financing, payout ratio and level of growth. In case of Bangladesh very few
research have been conducted on stock market volatility.Forhad (2004,
page-45), Ahmed, M, F. (2008, page-29) had conducted same research on
measuring the Weak form of efficiency on Dhaka Stock Exchange. Rahman,
Rahman and Ara (2007) and Akram, Mustafiz (2009, page-23) had forecasted
volatility of the market by using Arch model.Chowdhuryand Dr. TanbirAhmed.
(2005, page-28) see the Stock Market behavior in Bangladesh. Stock market
behavior, they measured by some specified statically model. Only Islam, Md.
S. &Jalil, M.A. (1999,page-45) shows the Relative Influence of Some Variables
on Stock Price on the Experience of Dhaka Stock Market.In the researcher
findings ,so there is a chance of researcher for research of measuring factors
of stock price volatility.
Bangladesh stock market, have some unique characteristics. Here, Investors
prefers stock dividend rather than cash, company gradually issues right share
(where in developed market those two thing are very uncommon).As bonus
share and right share increase the number of share automatically, investors
are worry about Earning per share and Net asset value per share instead of
company earnings and asset value(Tanbir ahmed,2005journal of
DU,page,56)This paper is mainly based on baskin model of measuring
voluntarily by his address related questions of share price volatility and firm
value changes as essentially being determined by factors which are
responsible for creating changes in the value of firms. This is done by referring
to related theories and practices and building empirical models to specify
and isolate the value-drivers associated with share price volatility and price
changes. But, considering Bangladesh capital market behaviour, here
researcher change the buskin model (1989) slightly by excluding dividend
pay-out ratios, size and asset growth of the company and debt to total asset

Page 2 of 20

ratio and include bonus and right share, earning per share volatility, and
growth in Net asset value.
1.3 Limitation of the study
This research is only based on evidence of price volatility in banking and nonbanking financial institutions. This research is more fruitful if it would be cover
all companies in market
1.4 Objectives of the Research
Primary Objective
The objectives of this study are:
i) To identifies factors suggested by investment theories and practices
and to observe their ability to jointly explain share price volatility on the
price of share of Banking and non-banking financial institution in
developing Dhaka Stock Exchange (DSE) and
Secondary Objective
i) To evaluate the effect of stock dividend and right share onthe share
price volatility of Banking and non-banking financial institution in
DSE.

1.5 Methodology
1.5.1 Hypothesis
In order to answer the above research questions, the following three
hypotheses are tested.
Hypothesis 1
Null Hypothesis: stock dividend and right share havent significant impact on
share price volatility.
Alternate hypothesis: stock dividend and right share along with other
fundamental variables have a significant impact on share price volatility.
Hypothesis 2
Null Hypothesis: Dividend yield hasnt significant impact on share price
volatility.
Alternate hypothesis: Dividend yield along with other fundamental variables
has a significant impact on share price volatility.
Hypothesis 3
Null Hypothesis: Earning per share volatility hasnt significant impact on share
price volatility.

Page 3 of 20

Alternate hypothesis: Earning per share volatility along with other

fundamental variables has a significant impact on share price volatility.
Hypothesis 4
Null Hypothesis: Net asset value growth hasnt significant impact on share
price volatility.
Alternate hypothesis: Net asset value growth along with other fundamental
variables has a significant impact on share price volatility.
1.5.2 Approach to the problem
There have been attempts to investigate share price volatility by relating
share price changes tone or more independent factors suggested by
valuation theories in finance and accounting. The derivation of the
relationship between price volatility and value-drivers is discussed by Williams
and Pfeifer (1982) and Baskin (1989).
1.5.3 Research Design
1.5.3.1 Research Type
The research is a causal research because it tried to explore the cause and
effect relationship between two variables (Malhotra, 2008, p.89).
1.5.3.2 Kind of information to be obtained
Data and information about daily price and return, news about Earning per
Share, Earnings, dividend deceleration and right issue of individual stocks was
obtained from CDBL with no missing return between January 2000-december
2009.

1.5.3.3 Sample Size

Sample for this research consists of allthe banking and non-banking financial
institution, listed, and fully operated in the Dhaka Stock Exchange (DSE), with
complete availableannual data of reported earnings,dividend,right issues and
stock prices during the period 2000-2009.Here author find only 17 institutions
(companies) have sufficient data of conducting research.Table-I below shows
Banks and non-banking financial institutions are-

Page 4 of 20

Table-I. List of sample banks and non-banking financial institution

Bank

Non-Bank

AB Bank Ltd
City Bank Ltd
lFIC Bank Ltd

IDLC Finance Ltd

United Leasing Ltd
Uttara Finance Ltd

Islami Bank Ltd

National Bank Ltd
pubali bank Ltd
Rupali Bank Ltd
Uttara Bank Ltd
Eastern Bank Ltd
Al-Arafah Islami Bank Ltd
Prime Bank Ltd
Southeast Bank Ltd
Dhaka Bank Ltd
NCC Bank Ltd

1.5.4 Data Collection Procedure

Data was collected on the basis of availability. Data was mainly collected
from the Dhaka Stock Exchange library, annual reports of different companies,
DSE websites, etc. For the literature review part, data was collected from
some secondary sources like websites, journals etc., papers published on
different universities of Bangladesh.
1.5.4.1. Primary Data Source
No primary data was used in this report.
1.5.4.2 Secondary Data Sources
The daily stock prices used in this paper was collected from the Dhaka Stock
Exchange (DSE) library, data sources of Union CapitaLand from DSE
executives. The earnings per share (EPS) data were collected from the annual
reports of the companies listed in the DSE and the website of DSE.

Page 5 of 20

1.5.5 Identification of Variables and model to be used

There have been attempts to investigate share price volatility by relating
share price changes to one or more independent factors suggested by
valuation theories in finance and accounting.
The derivation of the relationship between price volatility and value-drivers is
discussed by Williams and Pfeifer (1982) and Baskin (1989). The relationship
derived from several studies using this line of inquiry can be generalized as
follows:
PV=a + b (X.). + e.
Where
PV: the cross-sectional observed values of share price volatility of a
representative sample of i = 1, n =17
a, b.: respectively the intercept and the coefficients of theorysuggested independent variables j = 1, k. Factors were observed
for each firm in the sample of 17 firms over each year of the test
period from 2000 to 2009, cause for the stock price volatility
X: a matrix of independent variables observed over each year for
each firm in the sample; and
e: Residual term satisfying zero expectation, constant variance unrelated to
the independent variables
1.5.6 Factors (Control variables)
Share price volatility should be related to the basic return encountered in the
firm's product markets. We therefore include a control variable to account for
the variability in the firm's Earning Per share. We emphasis EPS variability, for
o The firms size (total number of share and paid up capital) is gradually
increase when stock dividend and right share is issued. So change in
total earning doesnt show any direct relationship between prices of
the share.
o General investor of Bangladesh consider potential EPS rather than total
earning of the firm when invest in a stock
. Under conditions of asymmetric information there is also likely to be a link
between share price volatility and dividend. A control variable was included
to reflect firm dividend yield.
Share price volatility could be linked to growth and investment opportunities.
The previously mentioned duration and rate of return effects assume timing
differentials in the firm's underlying cash flows. A variable to reflect growth
was also included. Here we included change in net asset value (NAV) per
share as it is direct link with share price; rather total asset .its assumed that
stock price volatility is arisen by stock dividend and right issue of share. A stock
dividend occurs when the board of directors authorizes a distribution of
common stock to existing shareholders. Stock dividend increases the number

Page 6 of 20

of outstanding shares of the firm's stock. Although stock dividend does not
have a real value, firms pay stock dividend as a replacement for a
supplement to cash dividend. Under stock dividend, shareholders receive
additional shares of the company in lieu of cash dividends. Stock dividend
requires an accounting entry transfer from the retained earnings account to
the common stock and paid in capital accounts. On the other hand right
share is issued when company need surplus amount for cash for using a
better investments opportunities. Under right issue, shareholders receive
additional shares of the company. Its also increase the paid up capital of the
company and investors get extra number of share. The investors of
Bangladesh capital market is indifferent about bonus share and right share.
(Amirul& Bashar, 2004)

1.5.7 Variable definition and formula to be used

Price volatility (PV)
The dependent variable in the regression is derived by following the
Parkinson's (1980) extreme value estimate or estimating variance of the rate
of return. In this case, for each year, the annual range of stock prices will be
divided by the average of the high and low stock prices and then raised to
the second power. These average measures of variance for all available
years can be transformed to a standard deviation by using a square root
transformation.

Cash Dividend yield (DY)

The variable was calculated by summing all the annual cash dividends paid
to common stock holders and then dividing this sum by the average market
value of the stock in the year. The average for all available years was utilized.

Change in Earning per share volatility

In order to develop this variable, the first step is to obtain an Standard
Deviation (by using Quarterly EPS) of available years of the ratio of Earnings
Per Share. The next step is to calculate deviation from the previous year.

Page 7 of 20

Growth in Net Asset value (NAV)

The yearly growth rate was calculated by taking the ratio of the change in
total assets in a year. Then the ratio was averaged over the years.

Stock Dividend/Bonus Share and right share

A stock dividend occurs when the board of directors authorizes a distribution
of common stock to existing shareholders. Stock dividend increases the
number of outstanding shares of the firm's stock. Stock dividend does not
have a real value, firms pay stock dividend as a replacement for a
supplement to cash dividend. Under stock dividend, shareholders receive
additional shares of the company in lieu of cash dividends. Company face
Stock dividend requires an accounting entry transfer from the retained
earnings account to the common stock and paid in capital accounts. Here
percentage of Stock dividend and right issue are directly input on the model.
1.5.8 Expectation and model development
Baskin (1989) reported a significant negative relationship between cash
dividend yield, payout ratio and price volatility. But his research, he ignore the
effect of bonus and right shares. In the situation of Bangladesh capital
market, those two are very important factors in price volatility. In the first
phase of the research earning growth is excluded. So the model presented
above can be generalized by the regression to include the control variables
as shown below:

PV j a1 a2 DY j a3 SDRj a4 EPSVj a5 NAVG j e j

From the Baskin (1989) result, the expectation was that the DY, variables
would be negatively related to PV whilst NAV growth rate would be positively
related to PV.It doesnt known what would be effect of bonus and right share
and Earning per share variable. By contrast, firms with relatively higher
earnings volatility or higher leverage will tend to display higher price volatility
and include earning growth variables, and at last done a single variable
linear regression to find the impact of bonus and right share in stock price
volatility.

Page 8 of 20

Chapter Two
2.1 Literature review
Volatility in financial markets has always been a key element in investment
decisions and modeling financial markets. Financial market volatility has
recently been investigated, among others, by Shiller (1989), Turner and Weigel
(1990), Scott (1991), and Peters (1994). .Rozeff (1982) found a high correlation
between value line CAPM and betas, earnings, size and dividend payout for
1000 US firms (Nishat, M. (1992),"Share prices, dividend and retained earnings
behavior in Pakistan stock Market", The Indian Economic Journal, Vol. 40
October-December, No. 2.
Fama (1991) and Fama and French (1992) focus on dividends and other cash
flow variables such as accounting earnings, investment, industrial production
etc. to explain stock price volatility. Baskin (1989) takes a slightly different
approach and examines the influence of dividend policy on stock price
volatility, as opposed to returns.
A number of theoretical mechanisms have been suggested that cause
dividend yield to vary inversely with common stock volatility. These are
duration effect, rate of return effect, arbitrage pricing effect and information
effect. Duration effect implies that high dividend yield provides more near
term cash flow. If dividend policy is stable high dividend stocks will have a
shorter duration. Gordon Growth Model can be used to predict that highdividend will be less sensitive to fluctuations in discount rates and thus ought
to display lower price volatility. Agency cost argument, as developed by
Jensen and Mackling (1976) proposed that dividend payments reduce costs
and increase cash flow, that is payment of dividends(in form of cash)
motivates managers to disgorge cash rather than investing at below the cost
of capital or wasting it on organizational inefficiencies (Rozeff, 1982 and
Easterbrook 1984). Some authors have stressed the importance of information
content of earnings (Asquith and Mullin, 1983; Born, Moser and officer 1983).
However, resources, in general, seem to have been devoted to studies
concerning developed financial markets. The present paper attempts to
investigate stock market volatility in an emerging market of a developing
country namely Bangladesh.Few studies have attempted to analyze the long
run behavior of the market and related issues (Ahsan, Amirul& Bashar,2005)
Omar Khalid Mohammad Rizwanul. (1999).they studied Security Price
Reaction to Dividend Announcement over the 10 years period. But no work
has been done to explore role of stock dividend and right issue in share price
volatility. It is also important to study its role in the Bangladeshi context after
the introduction of reforms after 2000(a result of crash in 1996), which
emphasized more towards use of technology, sophisticated trade system,
openness to foreign investor, and competition, which led to, increased
volatility in the market Dr. Tanbir Ahmed. (2005) and has reduced the
responsiveness of share price volatility to fundamental factors (Dr. Tanbir

Page 9 of 20

Ahmed. (2005)). in Bangladesh in general and specific to dividend policy are;

tax sealing on cash dividend, exemption of right and bonus shares from tax,
pattern shifting from cash to stock dividend and government policy of easing
restrictions on transfer
Of market profits etc. The table-II in below shows the Brief Findings of the Past
Studies regarding Dhaka Stock Exchange
Table- II. Key findings about past studies
Studies

Key findings

Haque,
Shamsul&Eunus,
Ahmed
Mahiuddin.
(1998)

Shows the Return & Market Efficiency in a Capital Market

Under Distress, mainly focus on the market behavior of 1996
crash time

Hossain,
Mohammad
Farhad. (2004).

Try to find out the Days of the weak effect in Dhaka Stock
Exchange. They found the evident of very little signal of
days of the weak effect on market index.

Houque,
Md.Nurul. (2005

Measuring Stock Market Behavior

Ahmed,
(1998)

M,

F. Seek out Seasonal and size Anomalies in Stock Market, and

found a significant impact of seasonal behavior on specific
industries stock price

Bairagi,
Signaling Effect of Dividend policy on Share Prices in
Ranajit Kumar. Bangladeshi Capital Market
(2003
Hossain,
Mahmud.(2001

Find relation between Accounting Earnings, Cash Flows

and Stock Returns.

Khan,
Al. Valuation of Shares: Aspects on Premium and Revaluation
Maruf.(1996)

Page 10 of 20

Chapter Three
3.1 Descriptive analysis
Table-1

Descriptive Statistics
Mean

Price volatility
DY cash
Dbonasright
EPSV
NAV growth

Std. Deviation

18.89

13.629

170

2.86

8.538

170

25.57

38.220

170

-48.19

918.549

170

3.51

38.345

170

Table 1shows a broad description of the summary statistics of the variables

used in the study. It shows the statistical means, standard deviation, median,
and standard error. According to Allen and Rachim (1996), if it is assumed
that stock prices follow a normal distribution pattern and ignoring the effect
of firm's going ex-dividend, the standard deviation of stock market returns
equivalent to the measured volatility of this study. This can be done using the
formula derived by Parkinson (1980) in line with Baskin (1989), here, the mean
of price volatility in banking and others financial sector in Bangladesh is
18.88%. This is little low with the results of Allen and Rachim (1996) on Australian
firms which was 29.42% and Baskin (1989) with US firms of 36.9%. Change in
EPSV (-48.19%) shows a negative growth over the years. In case of dividend
policy, result shows companies are interested in giving Stock dividend and
right share (avg 25.56%) instead of cash dividend (on an average 2.85% yield)

3.2. Correlation Analysis

Table 2-Pearson Correlation table
Price
volatility

DY cash

D(bonasrig
ht)

EPS
growth

NAV
growth

Price
volatility

1.000

-.090

.487

-.131

.041

DYcash

-.090

1.000

-.126

.027

-.006

Dbonasrig
ht

.487

-.126

1.000

.082

-.064

EPSV

-.131

.027

.082

1.000

-.921

NAV
growth

.041

-.006

-.064

-.921

1.000

Table 2 shows the correlation amongst the variables utilized for the study.
From the table, it can be seen that the correlation between price volatility

Page 11 of 20

and dividend yield is negative (-.090)as expected, this is in line with that of
Baskin(1989) which was -0.643, but it is in contrast with that of Allen and
Rachim (1996) which was positive (0.006). Also the correlation between price
volatility and EPS growth rate is negative (-.131) as expected, as expected
increase in earnings per share reduces risk ensure investors that they are in
safe. The correlation table also shows a high correlation between dividend in
form of stock and right issue of share, .487 (approximately 50. The correlations
for other variables are in line with their predicted sign with share price
volatility. Change in Earnings per share has a negative correlation with both
price volatility and NAV growth. This is in-line with expectation as firms with
volatile earnings are perceived to be more risky and management tends to
pay lower dividends (as shows in previous table) to have enough retained
earnings for years when earnings are bad, result an increase in net assets
value. Multicollinearity problem exist when the correlation between two
independent variables is equal to or greater than 70% (Drury, 2008). There is
therefore the need for the inclusion of the control variables in the regression
equation to see if there would be changes. The correlations for other
variables are in line with their predicted sign with share price volatility. But
there is a significant high negative correlation between asset growth and
earnings per share volatility with the value 0.921; this indicates that the
Multicollinearity problem exists between the two variables. The regression run
with and without one of the two variables to see if there was any effect, this is
shown later on appendix part. The result shows .254 and .23 R2. Respectively.
Equation exerted EPSV shows a positive relationship with Price volatility (see
appendix-1 and 2)

3.3. Regression analysis

3.3.1 Equation-1
In the first phase of regression analysis, four primary control variables have
been taken, and earnings growth rate has been excluded. The Model is

Where,
PV:
Price volatility
SDR: Stock dividend and right issue
EPSV: Earning per share volatility
NAVG: growth in Net asset value (per share).
DY:
Dividend yield

Page 12 of 20

Goodness of fit result

Table-3 : Goodness of fit result
R-squared
Adjusted R-squared
S.E. of regression
S.E. of residual
F-statistic
Prob(F-statistic)
Durbin-Watson stat

0.315
0.299
9895.421.
21496.086
15.946
0.000
1.465

Table -3 depicts that R Square is .315. In this model 31.5% of the model can be
explain by the independent variable, similar result in line with buskin(36.78%)
and much greater than Rouf (23.78%),Mohamed and nasir (22.74%). That
means Dividend yield (cash), (bonus and right), change in EPS growth rate
and change in asset growth rate of NAV can 31.5% explain the price volatility.
This is quite a high number because there are number of factor can affect
the price volatility.
The adjusted R square is .299. The adjust R square is closer to R square. So
the variation of this particular model is quite low and it was appropriately
sampled. It also suggests that the number of independent variable is
sufficient. Finally it can explain 29.9% of the price volatility by Dividend yield
(cash), Dividend yield (bonus and right), change in EPS growth rate and NAV
growth rate.
The Durbin- Watson statistics estimated the auto- correlation of the model. The
value is 1.465 which is close to the value of 2 that indicate the auto
correlation does not exist.
Sum of squares of regression is 9895.421. This would be the squared
differences between the predicted value of Y (Price Volatility) and the mean
of Y (Price Volatility. The improvement is in prediction by using the predicted
value of Y (Price Volatility) over just using the mean of Y.
Sum of squares of residual is 21496.086. It also called the residual error. It
means this models Sum of squares error in explaining price volatility.
F value is 18.989 and the p-value of F is .000. The P-value of F is less than .05. so
even on 99% confidence level independent variable can reliably predict the
dependent variable.

Page 13 of 20

Table-4 Coefficients

Unstandardized
Coefficients
Model
1

B
(Constant)

Std. Error

14.527

1.124

-.017

.104

Dbonasrigh
t

.181

EPSV
NAV
growth

DYcash

Standardize
d
Coefficient
s
Beta

Sig.

12.920

.000

-.011

-.168

.867

.023

.506

7.766

.000

-010

.002

.688

-4.151

.000

-.199

.059

-.560

-3.384

.001

a. Dependent Variable: Price volatility

After regression, the fined model is

Table-4 depicts that here, the cash dividend has .017%.Standard error is .104 and the Tvalue is .168.Both suggested that it is not significant for a 90% confidence level. The PValue starts of .867 which is much larger than general acceptance of less than .05
levels. So we can say that cash dividend yield is totally insignificant for the model.
These results is also supported by Miller and Modigliani (1961), argue that given perfect
capital markets, the dividend decision does not affect firm's value and is, therefore,
irrelevant. PS variability (-.10) and NAV growth (-.199) shows a negative relationship
with price volatility, having std error of .002 and .059 respectively. In both case P-value
is less then general acceptance level .05. Significant negative correlation between
price volatility and earning volatility confirms our expectations that companies with
volatile earnings per share are expected to pay lower dividends and to be regarded
as more risky. But in case of NAV growth, result is very unsatisfactory, as all the research
done by buskin (1989), in NYSE, Foong, Zakaria and Tan, (2007), in HSE, and Rafic (2005)
in KSE shows that asset growth rate has a significant positive relationship with stock
price volatility. This unsatisfactory result can be explained for split of shares of some
banks. Bonus and right share shows highest positive relationship(18.1%) with price
volatility
Withstd error of .023 and P-Value of .000 that means in even 99% confidence level we
can say Bonus and right share have a strong relationship with Price Volatility.

Page 14 of 20

3.3.2 Regression analysis (equation-2)

In the second phase of regression analysis, the three control variables have
been taken, excluding insignificantvariables (Cash Dividend yield) .The
Model is

PV j a1 a2SDRj a3EPSVj a4 NAVG j e j

Goodness of fit
Table-5: Goodness of fit result
R-squared
0.315
Adjusted R-squared
0.303
S.E. of regression
9891.756
F-statistic
25.585
Prob(F-statistic)
0.000
Durbin-Watson stat
1.44
Table-5 depicts that the second equation shows near about similar type of
result Square is .315. In this model 31.5% of the model can be explain by the
independent variable, similar result in line with buskin(36.78%) and much
greater than Rouf(23.78%),Mohamed and nasir(22.74%). That means bonus
and right, change in EPS growth rate, and change in asset growth rate of
NAV can 31.5% explain the price volatility
The adjusted R square is .303. The adjust R square is closer to R square. So
the variation of this particular model is quite low and it was appropriately
sampled. It also suggests that the number of independent variable is
sufficient.
The Durbin- Watson statistics estimated the auto- correlation of the model. The
value is 1.44(similar to first model) which is close to the value of 2 that indicate
the auto correlation does not exist.

Page 15 of 20

Coefficients
Table-6 Coefficients
Standardize
d
Coefficients

Unstandardized
Coefficients
Model
1

B
(Constant)

Std. Error

Beta

14.465

1.058

.181

.023

EPSV

-.010

Agrowth

-.200

Dbonasright

Sig.

13.668

.000

.508

7.878

.000

.002

-.690

-4.183

.000

.059

-.562

-3.408

.001

a. Dependent Variable: Price volatility

Table-6 shows approx. same result in the line with first equation. The
coefficient Bonus and right share have a positive relationship with Price
volatility(18.1%).here the result is slightly increase than previous
result(17.4%).EPSV (1%)and Asset growth(20%) both shows negative
relationship, that are in line with previous result
3.3.3 Regression analysis (equation-3)
In the third phase of regression analysis, a distinct variable linear regression
model is developed for single positive variable bonus and right share (, that
we found from our previous two analysis), to measure relation with price
volatility. The model is

PV j a1 a2 SDRj e
Where,
PV:
SDR:

Price volatility
Stock dividend and right issue

The summarized regression result isModel Summary

Mod
el

.487a

R
Square
.238

Adjusted R
Square
.233

Std. Error of
the Estimate
11.935237

a. Predictors: (Constant), Dbonasright

Page 16 of 20

ANOVAb
Sum of
Squares

Model
1

Regression

df

Mean Square

7459.927

7459.927

Residual

23931.580

168

142.450

Total

31391.507

169

Sig.

52.369

.000a

a. Predictors: (Constant), Dbonasright

b. Dependent Variable: Price volatility

Unstandardized
Coefficients
Model
1

Std. Error

(Constant)

14.445

1.102

DY
bonasright

.174

.024

Standardize
d
Coefficients
Beta
.487

Sig.

13.104

.000

7.237

.000

a. Dependent Variable: Price volatility

The result shows that, a lower R2 (23.8%) and adjustedR2 (23.3%) then previous
models. This model shows that there is a 17.4%, and a 48.7% standardized
relationship with price volatility and Bonus and right shares. The P-Value is still
.000, shows a 99% confidence level.

3.4 Hypothesis test & results

Based on the data & regression analysis, the acceptability of hypothesis
isdiscussed below:
According to the analysis, the study result all null hypotheses are rejected
except hypothesis 2 (based on table 4).
In case of Hypothesis 3, null hypothesis is accepted& alternative hypothesis is
rejected.

Page 17 of 20

Chapter Four
Result Summery and conclusion
The objective of this study is to measuring the factors affecting on stock price
risk in banking and non-banking financial institutions stock. A sample of 17
listed companies (banking and non-banking financial institutions) in Dhaka
Stock Exchange is examined for a period from 2000 to2009. The empirical
estimation is based on a cross-sectional regression analysis of the relationship
between stock price volatility and dividend yield, Bonus and right share,
earning per share volatility, and Net asset Value growth. The summery result is
stock dividend and right share (please seetable-3, 6) has a significant impact
on stock price volatility, whereas cash dividend hasnt any significant impact
on share price volatility that support the theory of Miller and Modigliani
(1961).Change in Earning per share volatility has a negative relationship with
share price volatility (please see table-3, 6), as the expectation.Net asset
value shows a negative relationship which is unexpected and may be reason
of the capital market inefficiencies in Bangladesh.

Page 18 of 20

References
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Gordon, M. J. (1959) Dividends, earnings and stock prices, Review of
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