The Determinants of Stock Market Development: A Study on Dhaka Stock Exchange Limited (DSE)

Abstract

The study investigates the determinants of stock market development in Bangladesh. Both primary and secondary sources of data have used to investigate the relationship between Stock Market Size, Liquidity, Volatility, Asset Pricing, Regulatory and Institutional Indicators and stock market development. The reliability of the variables was analyzed by Cronbach’s alpha. The correlation between the independent variables and dependent variables was measured with the Pearson’s Correlation and Spearman’s Correlation test. All the hypotheses formulated in this study under the conceptual framework have been accepted through conducting Spearman’s and Pearson’s Correlation Analysis as all the independent variables has significant positive correlation with the stock market development. The regression result indicates that all the dimensions of financial determinants combined significantly influence the stock market development. However, the stock market size and liquidity has significant positive relationship with the stock market development. In order to promote stock market development in Bangladesh, it is important to improve stock market liquidity by reducing demand supply gap of prospective share, to develop financial intermediaries and crating awareness among investors.

Keywords: Determinants, Stock Market development, Dhaka Stock Exchange limited

JEL Classification: C21, C830, G1