EXECUTIVE SUMMARY

The analysis of securities and make investment decisions fall into two very broad categories: fundamental analysis and technical analysis. Fundamental analysis involves analyzing the characteristics of a company in order to estimate its value. Technical analysis takes a completely different approach; it doesn't care one bit about the "value" of a company or a commodity. Technicians (sometimes called chartists) are only interested in the price movements in the market. Despite all the fancy and exotic tools it employs, technical analysis really just studies supply and demand in a market in an attempt to determine what direction, or trend, will continue in the future. In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components. In the process of economic development, stock markets play a pivotal role in channeling funds from the surplus unit to the productive (deficit) units. Stock markets provide adequate finance to the entrepreneurs. In recent years with the changing economic climate, the Government of Bangladesh has emphasized the development of stock markets in the country. Government is also trying to develop the stock markets through different policy measures, even though the rate of development is not up to expectation. Thus, the situation warrants detailed examination of the stock markets of Bangladesh and drawback in the system need to be point out. In this paper we tried to analyze the development and growth of stock exchanges and Securities and Exchange Commission (SEC) of Bangladesh. For evaluating the stock market performance data has been analyzed through the various statistical measures like growth percentage, average growth, trend equations, square of correlation coefficient & correlation matrix for Dhaka Stock Exchange (DSE) & Chittagang Stock Exchange (CSE). The paper also briefly describes some of the problems of Bangladesh stock market such as, inactive stockbrokers, non-existence of market makers, kerb trading, malpractices of companies, non-transparency of the deals, and poor performance of Securities and Exchange Commission (SEC) etc. In order to overcome the problems a few suggestions are given in this paper for stable the stock market.

INTRODUCTION
A capital market will play as a strong catalyst in the industrialization and economic development of the country.The Dhaka Stock Exchange (DSE) is a new and emerging stock exchange located in the capital city of Bangladesh. The Dhaka Stock Exchange has also undergone significant changes contributing towards the development of Bangladesh capital market. Theoretical and empirical literature has shown that the prices of shares and other assets are an important part of the dynamics of economic activity of the country. The development of the capital market is crucial for capital accumulation, efficient allocation of recourses and promotion of economic growth. The capital market acts as an intermediary between surplus units and deficit units of an economy and facilitates savings into investments. In addition, by ensuring liquidity for the invested funds, the capital market ensures optimum allocation of resources. Bangladesh being a developing nation in South Asia and characterized by underinvestment and poor infrastructure development needs presence of organized and wellfunctioning financial markets that would facilitate investment in efficient and profitable ventures and promote economic advancement. The Bangladeshs Dhaka Stock Exchange market has witnessed a radical transformation in the last decade. The adoption of international quality trading and settlement mechanisms and reduction of transaction costs have made the investors, both in domestic and foreign, more optimistic which in turn evidenced a considerable growth in market volume and liquidity. The market feature a developed regulatory framework, a modern market infrastructure, removal of barriers to the international equity investment, better allocation and mobilization of domestic resources and increased market transparency. These reforms set the stage for significant market expansion, with a trend development in size and liquidity. New equity issues, volume and value of trading and the number of traded companies all recorded significant progress. As a result, market capitalization increased from 1.3764 percent to 16.2849 percent of GDP during 1990-2009 and the turnover ratio increased from 1.6843 percent to 54.2524 percent. All these infer better efficiency of Bangladeshs Dhaka Stock exchange market. Despite this transformation Dhaka Stock Exchange market (DSE) has been shown greater volatility which has affected the informational efficiency of DSE. The Dhaka stock market has been experiencing volatility since its inception-the indices

reached the highest level in its history in November 1996 and eventually crashed; afterwards investors lost their confidence about the stock market. As a result, regulators reformed the market and introduced automation transaction in 1998 and this was expected to conduct studies on informational efficiency, particularly to investigate any improvement as a result of the automated trading system in the market. Thus both companies and investors want capital markets to assign fair prices to the securities being traded. In the language of corporate finance, companies and investors want the capital markets to be efficient. Whether capital markets are in fact efficient is a question which has been studied extensively for many years. One school of thought believes that the financial markets are efficient. Another school of thought believes that the financial markets are not efficient. Even within the believers of market efficiency, three forms of efficient market hypothesis are developed. A market is weak form efficient if the current stock prices or return series are not predictable from past prices or return information (Fama 1991) and hence follow a random walk. The market is semi-strong form efficient if the current security prices reflect all publicly available information. Finally, the market is strong form efficient if security prices reflect all private and public information. The traditional analysts strongly believe that the stock markets are efficient because stock prices reflect the true market value of future dividends. Thus the shareholders make decisions on which shares to add or remove from their portfolios. The investors such as commercial banks and other financial institutions make decisions about whether and at what price to offer finance to companies. Financial managers make decisions in the major areas of investment, financing and dividends. Shareholders, investors and financial managers can inform their decisions by evaluating the financial performance of companies using information from financial statements, financial database, the financial press, and from Internet. Ratio analysis of financial statements can provide useful historical information on the profitability, solvency, efficiency, and risk of individual companies. By using performance measures such as economic profit, earning per share, net asset value per share, and value added, company performance linked more closely with shareholders value and shareholders wealth and attention can be directed to ways in which companies can create more value for shareholders. But in recent years many market analysts have started arguing for market inefficiency, at least in its weak form. They claim that the traders are now paying more

attention to information related to recent trends in return instead of putting emphasis on the information related to future dividends. A large number of traders are buying stocks only because past returns were very high. These traders are often called feedback traders; believe that if the stock returns were in high in the recent past, they are likely to be high in future. Such behaviors of traders cause stock prices to go beyond the true values of stocks in the short run. This feedback trading makes the market more volatile in the short-run because in the long-run the stock prices tend to return to their true values.

BRIEF HISTORY OF STOCK MARKET IN BANGLADESH

The stock market history of Bangladesh refers back to 28 April, 1954 when the East Pakistan Stock Exchange Association Ltd. was established. Formal trading began on the bourse in 1956. The trading was suspended during the liberation war of Bangladesh in 1971. Operation resumed again in the 1976 with the change in government policy. During 1976, there were only 9 listed companies with total paid up capital of Tk.0 .138 billion and market capitalization of Tk. 0 .147 billion which was 0.138 % of GDP (Khan, 1992). Since then the stock exchange continued its journey of growth. The second stock exchange of the country, the Chittagong Stock Exchange(CSE) was established in December 1995.In order to control operation of the stock exchanges and trading of stocks of listed companies, the government of Bangladesh established the Securities and Exchange Commission of Bangladesh on 8th June, 1993 under the Securities and Exchange Commission Act, 1993 .The mission of the SEC is to protect the interests of securities investors, develop and maintain fair, transparent and efficient securities markets, securities and compliance with securities laws. From the inception the stock market of the country was growing in a slow pace. There was a large surge in the stock market in the summer and fall of 1996 evidenced by a 197.43%, 372.30% and 370.51% increase in the market capitalization, total annual turnover and daily average turnover respectively in DSE and 506.63%, 210.2% and 615.15% increase in the market capitalization, total annual turnover and daily average turnover in CSE. DSE general index grew from 832 in January 1 1996 to 3567 in November 14, 1996 while that of CSE grew from 409.4 in 1995 to 1157.9 in 1996. The market, however, crashed in ensure proper issuance of

December of 1996 and the index started to decline significantly since then with the index assuming a value of 507.33 as of November of 1999, a cumulative decline of 83.44% from 1996 to 1999 with the annual rate of 27.82%, and has yet to fully recover. Investors confidence was significantly damaged because of excessive speculations, allegedly aggravated by widespread irregular activities. The government of Bangladesh undertook the Capital Market Development Program (CMDP) supported by the ADB on 20 November 1997. The CMDP aimed at (i) strengthening market regulation and supervision, (ii) developing the stock market infrastructure, (iii) modernizing stock market support facilities, (iv) increasing the limited supply of securities in the market, (v) developing institutional sources of demand for securities in the market, and (vi) improving policy coordination. The policy matrix of the CMDP included 95 program measures. Central Depository Bangladesh Limited (CDBL) was incorporated as a public limited company on 20th August 2000 to operate and maintain the Central Depository System (CDS) of Electronic Book Entry, recording and maintaining securities accounts and registering transfer of securities; changing the ownership without any physical movement or endorsement of certificates and execution of transfer instruments, as well as various other investor services including providing a platform for the secondary market trading of Treasury Bills and Government Bonds issued by the Bangladesh Bank. CDBL went live with the Electronic Treasury Bills registry of Bangladesh Bank on 20th October, 2003 and thereafter started equity market operations on 24th January, 2004. It was set up to facilitate the computerized delivery and settlement of securities and eliminate to the extent possible, the paper work involved in handling the transactions and that would ensure risk-free and cost-effective settlement. Before establishment of CDBL, the delivery, settlement and transfer procedures were handled manually and were plagued by lengthy delays, risks of damage, loss, forgeries, duplication and considerable investment in time and capital. Besides, both the CSE (July 1998) and the DSE (August 1998) have automatic trading services. By having automated trading system and a central depository in place, the credibility of the country's Stock Exchanges in the eyes of the prospective foreign investors are expected to grow stronger and boost investment activities in the country's stock markets. Contrastingly, foreign portfolio investment, never more than $200 million, has virtually disappeared form the stock market of Bangladesh.

PROBLEM STATEMENT
Stock markets are great financial institutions for economic growth provided they are managed properly. Billions of dollars worth of capital can be raised from millions of investors, small and large with voluntary participation. From stock market investors can earn lots of money as well as lose lots of money. Artificially market can move this way or that way. It is not difficult for the big investors or the regularity authority to make market up word or down word. Legally or ethically it is wrong but in Bangladesh it is very familiar scenario. In Bangladesh there are many factors that are responsible for babul and crash of share market. These reasons are market regulatory authority manipulators, childish behavior on institutional investors, intervention of central bank, share split circuit breaker theory etc. all this reasons are created intentionally or because of the mistake made by the regulatory authority. Whatever because this activity, currently we have a volatile stock market.

PURPOSE OF THE STUDY

Purpose of the study is to explore, gather knowledge about certain legal and ethical issues and to provide solutions concerning the activities of recent ups and downs of share market in Bangladesh.

LITERATURE REVIEW
The Bangladesh capital market continued to rally handsomely in 2010 even though U.S and European market had to recover from recession effect. The market capitalization to GDP ratio has been increased over the year from 30% to 50%. DSE General Index (DGEN) has gained its peak at 8,918.51 point in December 5, 2010 and the lowest value was at 4,568.40 point. Over the year, DGEN increased 82.78% and reached at 8,290.41 point at the end of the year. The total market capitalization of all shares and debentures (excluding t-bills and tbonds) of the listed securities at the end of December, 2010 also stood higher at USD 49.4

billion, indicating a gain of 84 percent which was higher than USD 26.8 billion at the end of December, 2009. The total turnover has increased from USD 0.13 billion to USD .25 billion which indicates a 91% growth. Along with other factors, at least a portion of the upward movement of the market can be explained by the inadequate number of securities and huge fund flow in the capital market. The market was not able to uphold its bullish position from the beginning of December, 2010. During this time institutional investors had the tendency to realize profit from the market and it was expected that the market would remain flat in this time. However, the actual steep downward trend was not expected. One of the primary reasons for this abnormality could be the Bangladesh Banks decision regarding CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio) in the hope of curbing the inflationary pressure. Following the actions, call money rate has soared significantly and it rose as high as 180%, breaking the earlier record of 150% hit on March 30, 2006. From June to November, 2010 excessive liquidity decreased by 28% (see the table below).
Name of Stock Index BSE Sensex Karachi 100 DJ CBN China 600 Bangldesh DSE general S&P 500 Heng Seng Fig as on Dec 30, 09 17464.8 9386.9 29052.8 4535.5 1115.1 21872.5 Figure as on Dec 30, 10 20509.1 12022.5 26701.3 8290.4 1257.6 23035.5 Percentage (%) change 17 28 -8 83 13 5

REASON BEHIND THE OVERVALUED STOCK PRICE

Lack of Investment Opportunity
If we look, our power sector falls deeply in the year of 2009 & 2010. Lack of supply of gas, electricity shortage entails some investors to look behind from the real sector. In these two years the investment progress in industrial sector was seen very slowly for this reason. Again, due to shortage supply of power, the production was not up to the mark from the investors point of view. So lots of investors invest their money to stock market rather than industrial sector. In this way lots of money injected in the market but supply of share was increase so stock price rise.

Whitening the black money

It was started in the year 2007. At that time caretaker government allows the black money holders to invest their money into stock market without any charged. This rule is sustained in 2009 as well as 2010.Certainly a huge amount of black money is injected into the stock market in different period of time and we know that if the demand is more than supply price will rice.

Lack of supply of new shares: It is to be noted that the stock market will run smoothly and efficiently, when the number of shares are matched with number of money injected into the system. Most of the experts as well as analyst alarm DSE, SEC and the government about the need of supply of new shares into Bangladesh capital market. In 2010 only 13 securities are added into stock market. Among them, 8 mutual fund, 1bond and 4 different companies are enlisted. These numbers are very short against the demand of the share. Establishment of New Brokerage House & Merchant Banks branch: In the year 2010 there are huge number of brokerage house established in countrys various areas. SEC is reluctant to give nod to brokerage firm to establish more branches around the country. As the number of scripts remain very small in respect with money injected in stock market. Around 200 branches was opened in the year 2010, So more people were interested in stock market as the price of the most of the stock were rising over the period of time. But in this frame, the expected number of shares could not be higher. So, as a result the stock was getting higher price. Lack of Surveillance of Bangladesh Bank: According to Bank Company Act, No commercial bank in Bangladesh can invest more than 10% of its total liability. In the beginning of 2010, Bangladesh Bank was alarming some banks to control their heavy investment in stock market but not strictly conveyed. As a result, banks including leasing companies and merchant banks, seeing negligence of Bangladesh Banks role, investing huge bulk of money into stock market. At that very beginning Bangladesh Bank was reluctant to rules. Share split: In April SEC asked all the companies, who have a face value of 100 tk per share to convert in 10tk share. Now companies having 100tk face value started to declare the changing its face value. In this declaration it was found that the stock price of the respective company is jumped to 30 to 40% higher than previous price. Through the fundamental of the company itself remains unchanged. It is psychological effect upon the investors that changing face value can increase stock price to same extent. Manipulators Involvement: Most of the experts and analysts said that manipulators are involved in every stock market. They play a big role to increase the price of stock. Manipulators or gambler basically en---- with low paid up capital, which is considered as small companies. They keep buying the shares until there are not sufficient buyers to sell those shares. Sometimes they brought the share price 2-times within a few days. It is observed many counties worldwide. In case of Bangladesh market it was observed that there remains

huge number of manipulators. These manipulators are found as big businessman. We can see some of these stock price were getting 15 times more than it was before one year. It could happen if there involved in strong manipulators. Sometimes in case of big paid up capital share increasing price, they joint or collaborate with big merchant banks commercial banks and leasing companies they decide together that which big companies price share to be increased at what percentage or what price level. According to their plan, they created some rumors, which is injected by their nominee people in brokerage firms. Sometimes if planned failed, these manipulators manage the high officials of SEC former high officials of different banks and financial institutions, proprietors of some brokerage house and their selected nominees are considered as manipulators. It was said that there remains 10-15 such groups who control the whole market. Fraudulent in showing Company Fundamental: Company fundamental is the 1st criteria which upon an investor primarily look before investing in the particular stock. Fundamentals means: Companies earning per share (EPS), last 5 years dividend, projected future dividend, net operating each flow per share, price earning ratio, net asset value per share etc. sometimes the insider high officials of the company manipulate the figure of those variable in such a way that can impact on the stock market. Some of the companies like CMC Kamal, Mithun Knitting. ACI Formulation manipulated or changed the figure of the fundamentals which were not in consistent with pervious records. They showed 5-10 times move earning within three months, which represent absolute fraudulent. By this means, a particular stock price can certainly be increased. Face books Role: The social site Facebook had also played a role to hike in the stock price. Some investors open an account in Facebook. They form a group in the name of Bangladesh share market. In this site they post very lucrative items to purchase and leaks price sensitive information. Sometimes it prove true but the most of the time, it leads the general investors to mislead.

Our share market experienced a totally new kind of development in the trading. It watched both sides of a coin within two trading days. On January 10, 2011 we saw a huge selling pressure and a record fall, 600 points in the general index of Dhaka Stock Exchange (DSE) within just 50 minutes of trading. Again in the next day we found the other side of the coin when almost no seller was founding case of most of the shares. At the end of the days trading the DGEN, actually, gained 1012 points taking into consideration the previous days loss. Thus we witnessed both gain and record decline in index on January 10 and January 11 respectively. It appeared like a circus said a market analyst. The DGEN which

was 5367.11 points on January 10, 2010, increased 6249.35 on the same date this year. But in a days gap market index soared to 7512.09. The percentage change in one year stood at 39.9 from 16.40 within 2 consecutive trading days. In 2010, institutional sector some banks and non-bank financial institutions showed their investments characteristics like general investors. Over last 2 years, the profit of most of the banks and financial institutions became two to three times more than that of the previous years. The profit growth was attributed to profit earned from investments in shares. Thus many banks and institutions concentrated on share business instead of investing in their core banking activities. In early December 2010 when general index reached the record 8918.5 points, many analysts expressed their concern about the overvaluation and syndicated price hike. But that time our general investors were over inspired by the gain from the market. It was seen that most regularity decisions failed to slow down the unending market rally. Investing people became more dependent on rumors than fundamentals of the issues traded on the bursts. Insider traders turned out to be big gainers. Now it is becoming clear to us that there were many other factors that have brought the capital market on the verge of a collapse. Many of us started blaming the regulators. It is a matter of great regret that the SE, the central bank and other shareholders are also blaming each other. This ultimately proves the lack of coordination among them in policy-making and policy implement.

REASONS FOR COLLAPSE

Intervention of central bank In December the central bank raised the percentage of money commercial banks must hold in reserve in an effort to curb local lenders' exposure to the market and rein in inflation. Experts say this move played a key role in the crash, prompting a mass stock sell-off by banks as they sought to raise cash. (Salauddin Ahmed Khan) Circuit Breaker theory The introduction of a so-called "circuit breaker" to automatically halt trading if the market rises or falls more than 225 points was also an ill-advised. It creates panic (among retail investors). The government has to get rid of it. Rumor In Bangladesh most of the investor does not study the market. They depend on others and believe them from the bottom of their heart because they think others are more experience. They do not have faith on themselves. There is a phrase that if you ran without knowing

where to go you will fall badly same thing happened with the investors. Childish behavior of institutional investor Institutional investors are behaving like retail investors. They invest for a short period of time and sell the securities in the market. This behavior is one of the main reasons for the collapse of share market in Bangladesh. Initially ICB, Agrany bank, IDLC Finance, LankaBangla Finance invest in a institutional attitude. When AB Bank entered into the market all the financial institution /Merchant Bank do not maintain the discretionary account rather provide lone to the non-discretionary account and buy and sell share according to the client which creates a great impact in the share market. (Asset Management Companys meeting) Manipulation of investors In each stock market there are some investors who are very big. They can easily make the price of stock higher or lower. They are known as gambler. In case of Bangladesh market it was observed that there remains huge number of manipulators. These manipulators are found as big businessman. At first they raise the price through bulk transactionl, we can see some of this stock price were getting 15 times more than it was before one year. It could happen if there involved in strong manipulators. Sometimes in case of big paid up capital share increasing price, they joint or collaborate with big merchant banks commercial banks and leasing companies they decide together that which big companies price share to be increased at what percentage or what price level. According to their plan, they created some rumors, which are injected by their nominee people in brokerage firms. In this way they raise the price and attract the people and after that when they have made a good amount they sell their share to the market. When they release their share to the market sell quantity becomes more then buy quantity witch cause down word movement of stock price. IMF issue The International Monetary Fund's prescription to Bangladesh Bank for addressing the overexposure of commercial banks to the stock market also propelled the unprecedented fall. The SEC's excessive initiatives to cool the market in a short time are also blamed for the crash.

Artificial Rise One of the biggest reason may be is that market got artificial rise last month just to encourage the the small and medium investors and as soon as they stuck their money in the market big fishes withdrew their money to a large extent hence causes sudden decline. The Bubbles Burst Should the central bank play some role in bursting asset bubbles? This is a contentious issue that has been discussed for a long time. Some argue in favor of the view that central banks should burst bubbles. But, in their view, monetary policy should respond to asset bubbles in a cautious and moderate manner in order to avoid economic distortions. Some others argue against the role of central bank in bursting bubbles. They say that bubbles generally arise out of some combination of irrational exuberance, jumps forward in technology and financial deregulation, for which the connection between monetary conditions and the rise of bubbles is tenuous. Investment Withdraw The analysts have opined that the immediate reason for this crash was the policy of the regulators of the market who laid down a limit for investment by the banks and other financial institutions in the stocks. This was done in order to avoid the market being overvalued. As the banks and other big investor institutions withdrew the capital from the market, the panic ensued. Control the Liquidity Market insiders blamed the recent fall on the central bank's measures to control the liquidity flow in the banking system. In an effort to contain inflation, the central bank recently increased the Cash Reserve Ratio (CRR) for banks by 50 basis points to 6 per cent. It was also aimed at stopping credit-flow to non-productive sectors. Forced Sale The demands also include immediate halt to forced sale or trigger sale and reasonable rates of bank interest. The central bank also issued another directive asking financial institutions to adjust their stock investment exposure that month. From January, no institution will be allowed to invest more than 10 per cent of its total liabilities in the stock market, and the exposure will be calculated based on market price, not cost price.

Corruption by the regularity authority According to the law a person who is engaged in the SEC, DSE or CSE or their spouse do not have the authority to made transaction to the stock market but reality is little bit different. Lots of SECs employees spouse are engaged in stock market and made heavy transaction with more than one account. These people have played a vital role for the collapse of stock market in 2010-2011. After December 5 they sell stocks heavily which a big reasons for the collapse.

RESEARCH QUESTIONS
This study proposes to examine the following research questions: 1. Is there any significant relationship between share split and over price? 2. Is there any significant relationship between manipulation and over price? 3. Is there any significant relationship between role of face book and stock over price? 4. Is there any significant relationship between whitening the black money and stock over price? 5. Is there any significant relationship between intervention of Bangladesh Bank and crash of share market? 6. Is there any significant relationship between Corruption by the regularity authority and crash of share market? 7. Is there any significant relationship between Childish behavior of institutional investor and crash of share market? 8. Is there any significant relationship between manipulation of investors and crash of stock market?

HYPOTHESES
The hypotheses resulting from the research questions are: 1. There is a significant relationship between share split and over price 2. There is a significant relationship between manipulation and over price.

3. There is a significant relationship between role of face book and stock over price 4. There is a significant relationship between whitening the black money and stock over price. 5. There is a significant relationship between Corruption by the regularity authority and crash of share market 6. There is a significant relationship between intervention of Bangladesh Bank and crash of share market. 7. There is a significant relationship between Childish behavior of institutional investor and crash of share market. 8. There is a significant relationship between manipulation of investors and crash of stock market.

RESEARCH METHODOLOGY
Research Design With the above findings in the literature, this study aims to inspect the possible reasons for the overvalued and collapse of stock price in Bangladesh stock market. The projected framework (Figure1) represented the outline and arrangement of relationships among the set of considered variables. The purpose of the study was to measure correlations among variables. Thus, this study aims to inspect the possible reasons for the overvalued and collapse of stock price in Bangladesh stock market. Here, Lack of Investment Opportunity, Whitening the black money, Lack of supply of new shares, Establishment of New Brokerage House & Merchant Banks branch, Lack of Surveillance of Bangladesh Bank, Share split, Manipulators Involvement, Fraudulent in showing Company Fundamental, Face books Role, Intervention of central bank, Circuit Breaker theory, Rumor, Childish behavior of institutional investor being are considered as the independent variables and over price of stock and collapse of market is being considered as dependent variable. Sampling Method

The data used in this research consists of questionnaire responses from participants who are involved in stock market in Dhaka city. 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 will be taken only from these personnel of stock market. Our sampling technique will be simple random sampling under the probability sampling method. Cooper and Schindler (2003) stated that in this type of probability sampling method each population element is known and has an equal chance of selection. And our sample size will be 150. The study will be conducted only in Dhaka city due to time and budget constraints. Survey Instrument Questionnaires are the cornerstone for market research and the success of the questions will be determined by the quality and arrangement of the questionnaire itself. Without hesitation, questionnaires will permit us to gather information that cannot be found elsewhere from any secondary information such as books, newspapers and internet resources. This is because the information we obtain will be fresh and unique. The questionnaire survey is the most successful method for this study to collect the data because conducting personal interview to such a large sample of personnel would have been both time consuming and expensive. A structured questionnaire will be used in this study to collect data from the experts of share market. So, we can easily utilize the gathered data for quantitative analysis.

Data Collection Both primary and secondary data have been used in this study. First, primary data have been collected from interview. In order to gather information, in depth interview technique has been applied Mr. Shamimuzzaman one of the owner of ACE brokerage farm. Secondary data sources include Bangladesh Bank, including various reports and publications of SEC, Chittagong Stock Exchange (CSE) and Dhaka Stock Exchange

(DSE). The researchers 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. Data Analysis Our planned study was a co relational study. Correlation is a technique for investigating the relationship between two quantitative variables and Pearson's correlation coefficient (r) is a measure of the strength of the association between the two variables. So here, to investigate data, Pearsons Correlation analysis will be used to find out whether any connection exists between the independent and dependent variables. The acquired data will be analyzed through Statistical Package for Social Science (SPSS) software version11.5.

Research Timeline
Research Proposal

2011 2011 2011

June June

Writing Literature Review Data collection

June

procedure

LIMITATION OF THE STUDY

It will be quite impossible for us to prepare a report without limitations. Lacking of information will be a big factor. We will conduct the proposal

during our ongoing course, thus we will face serious time constrains and money constrains. So the lacking of information for comparison, lack of time & monetary problem will be the major limitations of this research work. Lastly, there are many other factors which can be a cause of babul and crash of stock market.

SIGNIFICANCE OF THE STUDY

This research has a number of implications on Bubbles and collapse of Bangladesh stock Market. The unexpected rise and fall in share prices mostly followed from the general confidence of the investors about political stability, euphoria of investment in shares, prospect of quick capital gains, a vacuum in respect of institutional presence in the share market, monopolistic dominance of member brokers, inefficiency of the SEC to cape with the developments, existence to kerb market, absence of proper application of circuit breaker. The stock market is not free from the problems, so the significances of the study are: Price manipulation-It has been observed that the share values of some profitable companies have been increased fictitiously some times that hampers the smooth operation of stock market. Delays in settlement: Financing procedures and delivery of securities sometimes take an unusual long time for which the money is blocked for nothing. Irregulation in dividend: Some companies do not hold Annual General Meeting {AGM} and eventually declared dividends that confused the shareholders about the financial position of the company. Selection of Membership: Some members being the directors of listed

companies of DES look for their own interest using the internal information of share market. Improper Financial Statement: Many companies of DSE and CSE do not focus real position of the company as some audit firms involve in corruption while preparing financial statements. As a result shareholders as well as investors do not have any idea about position of that company.

RECOMMENDATION
Some of the recommendations are given from our report analysis: The government should relax IPO rules that is a company with at least Tk 25 crore in paid-up capital, including the IPO offer size, should be allowed for listing on the exchanges in where the existing IPO (initial public offering) rules allow a company having minimum Tk 40 crore in paid-up capital, including the IPO offer size, to be listed on the exchanges. Many companies are interested to come to the market, but cannot due to the IPO conditions. If the rules are relaxed, they will be able to bring more new companies to the market that is now facing a dearth of fresh securities. The government in the proposed budget has doubled tax on brokerage commission that may hurt the stockbrokers. Presently, the tax deductible at source for brokerage commission of the stockbrokers is 0.05 percent, which has been proposed to 0.10 percent. But the government could have increased the tax to 0.06-0.07 percent, with the trading volume on a continuous downslide following the recent market catastrophe; it is not the right time to double the tax on brokerage commission. Government should make SEC accountable, transparent to restore the past glory of the regulatory body through proper implementation of regulations on the basis of morality. So the recommendation is that on restructuring the regulatory framework could be formulated for ensuring a realistic, effective and stable capital market so that both supply side and demand side constraints could be addressed effectively.

According to the stock market scam probe report government should obviously take actions against the culprits of the share market debacle. Government should provide educational programs like various training session for the small investors to increase their analytical ability before investing on share market. Because small investors are the gin pig when the market crushes. To avoid this they should participate the monthly awareness program which is conducted by DSE. Experts stress that amateur investors need to be wiser and tougher .SEC has also liability to arrange seminar and road show in different branches of merchant banks and brokerage houses. SEC should initiate awareness, educational and promotional programs through institutional training for a vibrant market with active presence of issuers and investors.

Demutualization of a stock exchange transforms it from an entity owned by mostly brokerage-owning members into a for-profit company owned by shareholders. It ensures a sound corporate governance, alternative business models and operational efficiency. A demutualized exchange can also freely trade on the market like any other public company. Demutualization is a must to increase transparency in the bourses functions.

It is obvious that all the stack holders, commercial banks, mutual funds, merchant banks and mostly the retail investors who made up this capital market. Policy coordination across finance ministry, central bank, SEC and parliamentary standing committee is essential for the capital markets and the health of the financial system It is the duty to government to make proper co-ordination among these market players. The decision of Bangladesh Bank should not contradictory to the investors part. Commercial banks should act more responsible to stabilize the capital market with the help of Bangladesh Bank. These entire players should act responsible behavior in proper guideline.

CONCLUSION
Current unsettled market environment is certainly not conducive for market development and for small investors. All indicators are pointing to the conclusion that the stock prices are generally over valued and a market correction to bring prices in line with economic fundamentals of the companies would be desirable for future market development. When foreign and domestic institutional investors are pulling out of the market and holding large cash reserves for future investments, it is not the time for new and uninformed investors to join the market. The investment guru Warren Buffet has rightly characterized stock market frenzy in the following manner in 2000: "The line separating investment and speculation is never bright and clear ... becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money." It is thus imperative on the part of policy-makers to send clear warning signals highlighting the heightened risks in order to protect ordinary investors. Today's stock market is not as immature as it was in 1996. Nevertheless, when we see small investors erecting road blocks and burning tires whenever stock prices come down marginally, we have to believe that this market is being driven by mob frenzy. When the great scientist Sir Isaac Newton lost a bundle with the bursting of the South Sea Bubble, he observed that: "I can calculate the movements of stars, but not the madness of men." If the madness in Bangladesh stock market continues for a few more months, the bubble would become much bigger and it would explode like it did in 1996. We may still have time, but the policy-makers would have to act now and in a concerted manner.