Business research Essay Example

Determinants of Stock Returns/Stock Prices

Do the external shocks influence stock pricing in emerging economies?

Objective

To establish the determinants of stock prices in Bangladesh stock market in the financial sector

Hypothesis

Pricing of stock in stock markets in emerging economies are influenced by changes in economic environments than in advanced economies.

Question

Does macroeconomic variables influence stock returns in emerging Asian economies like Bangladesh?

Data source

International Journal of Business and Management Invention.

Scope/Variables + model

Data for pharmaceuticals industry listed on Dhaka Stock Exchange obtained between (2005 to 2011). The data comprises:

= Market CapitalizationezFirm si

Return on equity=ROE

Return on assets=ROA

Net asset value=NAV

Dividend per share= DPS

Earnings per share= EPS

DPS
₅ + βROE
₄ROA + β₃ + β NAV₂Firm size + β₁α+ βStock return= Model:

+e EPS₆+ β

Lit review

This study aims at establishing the role of macroeconomic fundamentals in shaping the existing stock prices in stock markets. Before an investor places funds in a certain avenue, he or she has to be well informed about the stock market performance. Many researchers have examined the relationship between some macroeconomic factors and stock prices. This is in quest to establish the determinants of returns on stock in different countries. Bhatt and Sumangala (2012) concluded that EPS impacted the equity share’s market value in India, a conclusion reached after collecting data on EPS and the market value existing of equity share conducted in 50 companies between 2006 and 2011. Company performance, change in management and board of directors, new asset creation, form the fundamental factors which were identified by Al-Tamimi (2007) during a study on United Arab Emirates (UAE), including external factors like inflation and government regulations greatly influence stock prices. Sharma (2011) tried to ascertain the relationship existing within EPS, DPS, and stock price, only to find out that DPS and EPS are strong determinants of stock prices. This was also backed up by Balkrishan (1984) in his analysis of the interrelationship existing therein.

Khan, K.I., 2012. Effect of Dividends on Stock Prices–A Case of Chemical and Pharmaceutical Industry of Pakistan. Management, 2(5), pp.141-148.

Moore, T. and Wang, P., 2014. Dynamic linkage between real exchange rates and stock prices: Evidence from developed and emerging Asian markets. International Review of Economics & Finance, 29, pp.1-11.

Naik, P.K. and Padhi, P., 2012. The impact of macroeconomic fundamentals on stock prices revisited: evidence from Indian data. Eurasian Journal of Business and Economics, 5(10), pp.25-44.

OSISANWO, B.G. and ATANDA, A.A., 2012. Determinants of stock market returns in Nigeria: a time series analysis. African Journal of Scientific Research, 19(1).

Uddin, M.R., 2013. SM Zahidur Rahma dan Md. Rajib Hossain. 2013. Determinants of Stock Prices in Financial Sector Companies in Bangladesh-A Study on Dhaka Stock Exchange (DSE). Interdisciplinary Journal of Contemporary Research in Business, (3), pp.471-480.

Timeline

Action Time

of Feb)^thData collection 10 hours (before 29

of March)^thCalculate data 10 hours (before 7

of March)^thAnalyze data 5 hours (before 14

of March)^stWriting of introduction methodology and literature review 20 hours (before 21

of April)^rdResults and analysis 5 hours (before 3

of April)^thConclusion and structure 10 hours (before 10

of May)^stCheck 5 hours (before 1