1

INTRODUCTION:

Investing in securities such as shares, debenture and bonds is profitable as well as exciting. It is
indeed rewarding, but involves a great deal of risk and calls for scientific knowledge as well as
artistic skill. In such investment, both rational as well as emotional responses are involved.
Investing in financial securities is now considered to be one of the best avenues for investing
ones saving while it is acknowledged to be one of the most risky avenues of investment.
Creation of a portfolio helps to reduce risk without scarifying returns. An investor considering
investment in securities is faced with the problem of choosing from among a large number of
securities. This choice depends upon the risk-return characteristics of individual securities.


Objective of the study:

1.Investment decision:

One of the most important long term decisions for any business relates to investment.
Investment is the purchase or creation of assets with the objective of making gains in the
future. Typically investment involves using financial resources to purchase a machine
building or other asset, which will then yield returns to an organization over a period of
time.


2.Market inefficiency:

Bangladesh's Dhaka Stock Exchange (DSE) is independent and follows the random walk model.
The study focuses on assessing if the DSE deviates from idealized efficiency. The sample
primarily includes all the listed companies on the DSE daily price index over the period 2003 to
2012. The results of both non-parametric (KolmogorovSmirnov: normality test and run test)
and parametric test (Auto-correlation test, Auto-regressive model, ARIMA model) provide
evidence that the security returns do not follow the random walk model and the significant auto-
correlation coefficient at different lags reject the null hypothesis of weak-form efficiency. The
results are consistent with observations in different sub-samples without outlier and for
individual securities.













2

Methodology:

Equation:


Daily HPR 100
0
0 1

=
p
p p

HPR= AVERAGE(Daily HPR)
Annualize Return 1 ) 1 (
360
+ = HPR
Daily Standard Deviation=STDEV(data)
Annualized Standard Deviation
2 / 1
360 = SD
Annualized Real Rate of Return 1
) 1 (
) 1 (

+
+
=
rate Inflation
AR

CV=VAR(Data)
RTV
Deviation dard S Annualized
rate bill T ARRR
tan

=
|=SLOPE(Company data, Index Data)
= Intercept(Company data, DGN Index data)
CAPM=T-bill Rate+(ARRR-T-bill rate)|
) ( ) ( ) ( ) (
2 2 1 1 n n p
R E W R E W R E W R E + + + =
2 / 1
2 , 1 2 2 1 1
2
2
2
2
2
1
2
1
) 2 ( o o o o o W W W W
p
+ + =
Return
F p c
R y r E y r E + = ) 1 ( ) ( ) (
Risk
p c
y o o =
2
5 . 0 ) (
i i
A r E U o =
P A
R rc E
y
f
2
^
) (
o

= and
^
1 y R
f
=
) ( )] ( ) ( [ ) ( ) (
) ( ) ( ) (
,
2 2
,
2
F D E D D E E D
F D f E D
D
R R COV R E R E R E R E
R R COV R E R E
W
+ +

=
o o
o

D E
W W =1
BD F D F D
R R COV o o = ) (
,



i f m f i
R R R r E
Model CAPM
| ) ( ) (
:
+ =








3

COMPANY PROFILE:


AFTAB AUTOMOBILES: Aftab Automobile is Engineering Company. This company listed in
DSC in 1987, Market Category A, Share Percentage: Sponsor/Director 30.5, Govt.0, Institute
50.73, Foreign 0, and Public 18.77.Its Authorized Capital in BDT 1200.0 (mn), Paid-up Capital
in BDT 855.0 (mn), Face Value 10.0, Reserve & Surplus in BDT 1719.56(mn), Total no. of
Securities 85475377 Current Price Earnings Ratio (P/E) 15.48 and Basic EPS 5.36.

AL-ARAFAH ISLAMI BANK: AL-ARAFAH ISLAMI BANK is a Bank. This company listed
in DSC in 1998, Market Category A, Share Percentage: Sponsor/Director 37.52, Govt.0,
Institute 16.12, Foreign 46.36, and Public 0.Its Authorized Capital in BDT 10000.0 (mn), Paid-
up Capital in BDT 7131.0 (mn), Face Value 10.0, and Reserve & Surplus in BDT 1719.56 (mn),
Total no. of Securities 713098010 Current Price Earnings Ratio (P/E) 7.32.

ADVANCE CHEMICAL INDUSTRIES: ADVANCE CHEMICAL INDUSTRIES
Pharmaceuticals & Chemicals Company. This company listed in DSC in 1976, Market
Category A, Share Percentage: Sponsor/Director 34.2, Govt.0, Institute 34.54, Foreign 0, and
Public 31.26.Its Authorized Capital in BDT 500.0 (mn), Paid-up Capital in BDT 238.0 (mn),
Face Value 10.0, Reserve & Surplus in BDT 3658.53 (mn), Total no. of Securities 23773833,
Current Price Earnings Ratio (P/E) 13.85.

MONNO CERAMIC: MONNO CERAMIC is a Pharmaceuticals & Chemicals. This
company listed in DSC in 1983 , Market Category B, Share Percentage: Sponsor/Director
56.48, Govt.0,


Institute 14.12, Foreign 0.01, and Public 29.39.Its Authorized Capital in BDT 500.0 (mn), Paid-
up Capital in BDT 239.0 (mn), Face Value 10.0, and Reserve & Surplus in BDT 2065.8 (mn).
Total no. of Securities 23928020, Current Price Earnings Ratio (P/E) 38.73.

NATIONAL BANK BANGLADESH LIMITED: NATIONAL BANK BANGLADESH
LIMITED is a Bank. This company listed in DSC in 1984, Market Category A, Share
Percentage: Sponsor/Director 30.21, Govt.0, Institute 10.09, Foreign 1.01, and Public 58.69.Its
Authorized Capital in BDT 17500.0 (mn), Paid-up Capital in BDT 14196.0 (mn), Face Value
10.0, and Reserve & Surplus in BDT 7366.52 (mn). Total no. of Securities 1419603244, Current
Price Earnings Ratio (P/E) 5.13

DHAKA BANK: DHAKA BANK is a Bank. This company listed in DSC in 2000, Market
Category A, Share Percentage: Sponsor/Director 50.53 , Govt.0, Institute 19.46 , Foreign 0,
and Public 30.01.Its Authorized Capital in BDT 10000.0 (mn), Paid-up Capital in BDT 4668.0
(mn), Face Value 10.0, and Reserve & Surplus in BDT 4626.2 (mn). Total no. of Securities
466759413, Current Price Earnings Ratio (P/E) 5.21.

PRIME BANK: PRIME BANK is a Bank. This company listed in DSC in 1984, Market
Category A, Share Percentage: Sponsor/Director 40.75 , Govt.0, Institute 20.95, Foreign 1.83,
and Public 36.47.Its Authorized Capital in BDT 10000.0 (mn), Paid-up Capital in BDT 9358.00
4

(mn), Face Value 10.0, and Reserve & Surplus in BDT 7707.45 (mn). Total no. of Securities
935771469, Current Price Earnings Ratio (P/E) 9.12


RENATA LTD: RENATA LTD is a Pharmaceuticals & Chemicals Company. This company
listed in DSC in 1979, Market Category A, Share Percentage: Sponsor/Director 51, Govt.0,
Institute 15.03, Foreign 22.44, and Public 11.53.Its Authorized Capital in BDT 1000.0 (mn),
Paid-up Capital in BDT 282.0 (mn), Face Value 10.0, Reserve & Surplus in BDT 3964.91 (mn),
Total no. of Securities 28241875, Current Price Earnings Ratio (P/E) 19.28.

BeximcoPharma
It is a Pharmaceuticals & Chemicals company. This company is listed in 1986 at Dhaka Stock
Exchange. It is a A category share. It share percentage is director 11.61%, institute 11.57%,
Foreign 23.82, Public 53%. It authorized capital is BDT. 9100mn, and paid up capital is BDT.
3046. mn. It share face value is BDT. 10. Its total no. of shares 304639050. Its currents P/E ratio
is 14.07and EPS 14.07.

Apex Foods Ltd.
It is anFood & Allied company. This company is listed in 1981 at Dhaka Stock Exchange. It is a
A category share. It share percentage is director 50.42%, Govt. 0% institute 14.89%, Foreign
0%, Public 34.69%. It authorized capital is BDT. 150 mn, and paid up capital is BDT.57 mn. It
face value of the share is BDT. 10. Its total no. of shares 5702400. Its currents P/E ratio is 26.64
and EPS 2.71.

AB Bank Ltd

It is a Bank. This bank is listed in1983 at Dhaka Stock Exchange. It is a A category share. It
share percentage is director 13.9%, Govt. 0.57% institute 49.29%, Foreign 0%, Public 36.24%.
It authorized capital is BDT. 6000mn, and paid up capital is BDT.4423 mn. It face value of the
share is BDT. 10. Its total no. of shares 442333668. Its currents P/E ratio is 10.03and EPS 3.78 .

Meghna cement Ltd.
It is a Cement company. This company is listed in 1995 at Dhaka Stock Exchange. It is a A
category share. It share percentage is director 52.3%, Govt. 0% institute 14.3%, Foreign 0%,
Public 33.4%. It authorized capital is BDT. 5000mn, and paid up capital is BDT.225 mn. It face
value of the share is BDT. 10. Its total no. of shares 22500400. Its currents P/E ratio is 34.63
and EPS 2.96.







5

FINDINGS OF STUDY













From the above graph ,we can say that the average DHPR is vary company to company.Here we
found that the Advanced chemical industries,Reckitt Benkiser&Renata Ltd has the highest DHPR
than the other companies.













-0.2%
-0.1%
-0.1%
0.0%
0.1%
0.1%
0.2%
0.2%
A
B

B
N
K

L
T
D
A
d
v
a
n
c
e
d

A
f
t
a
b

A
L

A
R
A
F
A
H

B
R
I
T
I
S
H

B
E
X
I
M
C
O

D
U
T
C
H

B
A
N
G
L
A

K
E
Y
A

C
O
S
M
A
T
I
C
S

M
O
N
N
O

N
A
T
I
O
N
A
L

B
A
N
K

R
E
C
K
I
T
T

P
R
I
M
E

B
A
N
K

L
T
D
A
P
E
X

F
O
O
D
S

L
T
D
A
P
E
X

T
E
N
N
E
R
Y

B
A
N
G
A
S

L
I
M
I
T
E
D
M
E
G
H
N
A

D
H
A
K
A

B
A
N
K

L
T
D
K
O
H
I
N
O
O
R

R
E
N
A
T
A

L
T
D
U
T
T
A
R
A

F
I
N
A
N
C
E

0.2%
0.2%
0.1%
0.1%
0.1%
0.1%
-0.1%
0.2%
0.1%
0.0%
0.2%
0.1%
0.1%
0.1%
0.0%
0.1%
0.1%
0.1%
0.2%
0.1%
Average DHPR
6




From the above graph ,we can say that ,the daily standard deviation are closely ralative to the
every company.Here we found that the DBBL,NBL &Bangas LTD has the highest Daily Standard
Deviation than the other companies.






















0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
3% 3%
3%
4%
3%
4%
8%
4%
4%
5%
3%
4%
4%
3%
5%
3%
3%
5%
3%
3%
Daily standard deviation
7







Here we found that, the Renata Ltd, Reckitt Benkiser & the Advanced chemical industries Alpha
is higher than the other companies.









-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
0.43
0.54
-0.03 -0.02
0.10
0.20
-0.54
0.48
0.13
-0.08
0.57
0.41
0.39
0.06
-0.04
0.09
0.15
-0.03
0.58
0.08
ALPHA
8


Here we found that, the Aftab automobiles companys Beta is higher than the other companies.

From the above graph ,we can say that the CV of National Bank is higher than the other
companies.
-500%
0%
500%
1000%
1500%
2000%
2500%
3000%
118% 101%
582%
856%
313%
231%
-369%
122%
280%
2821%
92%
136% 153%
375%
1439%
263%
183%
1105%
69%
280%
CV
-1%
0%
1%
2%
3%
4%
5%
6%
7%
0%
0%
6%
0%
0%
3%
0%
1%
0%
1%
0%
2%
1%
1%
-1%
2%
1%
0% 0%
1%
Beta
9


From the above graph ,we can say that the RTV of Renata Ltd ,Reckitt Benkiser ,Advanced
chemical industries & AB Bank is higher than the other companies.












-40%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
67%
82%
-1%
-3%
15%
28%
-34%
67%
19%
-8%
92%
58%
51%
10%
-4%
18%
32%
-3%
121%
16%
RTV
10



From the above graph ,we can say that ,the CAPM of every companies are closely relative.
Here we found that ,the CAPM of Aftab automobiles are higher than the other companies.






Summary of the Findings
On the basis of highest Alpha I have selected the two stock AB BANK and ADVANCED
CHEMICAL INDUSTRIES. Annualized Real Rate of Return of AB BANK is 54% and
annualized standard deviation is 64%. At the same Annualized Real Rate of Return of Advanced
Chemical Industries is 65% and annualized standard deviation is 65%.


0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
A
B

B
N
K

L
T
D
A
d
v
a
n
c
e
d

c
h
e
m
i
c
a
l

A
f
t
a
b

a
u
t
o
m
o
b
i
l
e
s

A
L

A
R
A
F
A
H

I
S
L
A
M
I

B
R
I
T
I
S
H

A
M
E
R
I
C
A
N

B
E
X
I
M
C
O

P
H
A
R
M
A

D
U
T
C
H

B
A
N
G
L
A

K
E
Y
A

C
O
S
M
A
T
I
C
S

M
O
N
N
O

C
E
R
A
M
I
C
S

N
A
T
I
O
N
A
L

B
A
N
K

L
T
D
R
E
C
K
I
T
T

B
E
N
K
I
S
E
R

P
R
I
M
E

B
A
N
K

L
T
D
A
P
E
X

F
O
O
D
S

L
T
D
A
P
E
X

T
E
N
N
E
R
Y

L
T
D
B
A
N
G
A
S

L
I
M
I
T
E
D
M
E
G
H
N
A

C
E
M
E
N
T

D
H
A
K
A

B
A
N
K

L
T
D
K
O
H
I
N
O
O
R

R
E
N
A
T
A

L
T
D
U
T
T
A
R
A

F
I
N
A
N
C
E

11.08% 11.00%
13.11%
11.09%
10.90%
12.05%
11.09% 11.17%
10.90%
11.40%
11.13%
11.65%
11.46%
11.23%
10.68%
11.80%
11.38%
10.88% 10.90%
11.21%
CAPM
11


Comments and Conclusion:
From the above discussion, we can say that Dhaka Stock Exchange is an inefficient Market.
Most analysts believe that no market is perfectly efficient that some inefficiency is inevitable.
The daily market return series do not follow random walk model which means DSE is inefficient
at weak form. The market practice suggests flow of information is not asymmetric to all the
investors at a time resulting into an advantage to a group of investors acquiring the information
early ahead to make an abnormal profit.Another issue is the inequality between demand and
supply of shares in the market. First, lack of quality shares instigates instability in the market.
Second, religious sentiment forces some not to keep their money in the bank as they believe
interest rate to be forbidden in Islam. And for this, they invest in stock market sometimes in poor
quality shares mostly which again increases the demand against the supply of quality shares
resulting into abnormal increase in price. Further the approval of 0% income tax on Capital Gain
encourages investors to invest in the market which increases the demand where as the supply
remains the same. However, our main objectives of completing this report to know the way of
choosing preferable securities with positive alpha from the stock market. So, to make an
investment decision all of the required calculation is performed.













12


Reference:
- DSE Library
- Company Profile of Dhaka Stock Exchange
- Websites




















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14
























15





















16





















17