Analysis on Factors that Affect Stock Prices: A Study on Listed Cement Companies at Dhaka Stock Exchange

Abstract

This study investigates on identifying the main forces that affect share prices in the capital market of Bangladesh. For this, the study considers a panel data set of 7 companies of cement industry listed in the Dhaka Stock Exchange (DSE) for the period 2006-2015.The investigation approach is designed with Ordinary Least Square (OLS) regression with fixed effects and random effects models. Six fundamental and technical issues namely Earning Per Share (EPS), Net Asset Value Per Share (NAVPS), Price Earnings (P/E), Gross Domestic Production (GDP), Consumer Price Index (CPI) and Interest Rate Spread (IRS) have been brought in light as the major determinants of prices in cement industry. The findings claim that these variables are instrumental in affecting the share prices in the Bangladesh market as far as the cement industry is concerned. Among these factors EPS, NAVPS, P/E and CPI have been found significantly instrumental for cement industry in Bangladesh contexts while other variables were not found noticeably significant. A moderate R square (0.1142-.4567) found in both the Fixed and Random models justify the considerable impact of these variables on the market price of shares. Hence, the study recommends present and potential investors to consider these factors prior to trade and inject funds on securities as the study witnessed volatility in share prices by the fluctuations of these factors.

Key Words: Capital Market, Share Price, Dhaka Stock Exchange.