Market Efficiency, Time-Varying Volatility and Equity Returns in Bangladesh Stock Market
This paper empirically examines the issue of market efficiency and time-varying risk return relationship for Bangladesh, an emerging equity market in South Asia. The study utilizes a unique data set of daily stock prices and returns compiled by the authors which was not utilized in any previous study. The Dhaka Stock Exchange (DSE) equity returns show positive skewness, excess kurtosis and deviation from normality. The returns display significant serial correlation, implying stock market inefficiency. The results also show a significant relationship between conditional volatility and the stock returns, but the risk-return parameter is negative and statistically significant. While this result is not consistent with the portfolio theory, it is possible theoretically in emerging markets as investors may not demand higher risk premia if they are better able to bear risk at times of particular volatility (Glosten, Jagannathan and Runkle, 1993). While circuit breaker overall did not have any impact on stock volatility, the imposition of the lock-in period has contributed to the price discovery mechanism by reverting an overall negative riskreturn time-varying relationship into a positive one. As a policy to improve the capital market efficiency, the timely disclosure and dissemination of information to the shareholders and investors on the performance of listed companies should be emphasized.
|Date of creation:||Mar 2000|
|Date of revision:||Jun 2002|
|Contact details of provider:|| Postal: 4700 Keele Street, Toronto, Ontario, M3J 1P3|
Phone: (416) 736-5083
Fax: (416) 736-5987
Web page: http://dept.econ.yorku.ca/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Harvey, Campbell R, 1995.
"Predictable Risk and Returns in Emerging Markets,"
Review of Financial Studies,
Society for Financial Studies, vol. 8(3), pages 773-816.
- Campbell R. Harvey, 1994. "Predictable Risk and Returns in Emerging Markets," NBER Working Papers 4621, National Bureau of Economic Research, Inc.
- Bekaert, Geert & Harvey, Campbell R, 1995. " Time-Varying World Market Integration," Journal of Finance, American Finance Association, vol. 50(2), pages 403-444, June.
- Geert Bekaert & Campbell R. Harvey, 1994. "Time-Varying World Market Integration," NBER Working Papers 4843, National Bureau of Economic Research, Inc.
- Baillie, Richard T. & DeGennaro, Ramon P., 1990. "Stock Returns and Volatility," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 25(02), pages 203-214, June.
- Baillie, R.T. & Degennaro, R.P., 1988. "Stock Returns And Volatility," Papers 8803, Michigan State - Econometrics and Economic Theory.
- Buckberg, Elaine, 1995. "Emerging Stock Markets and International Asset Pricing," World Bank Economic Review, World Bank Group, vol. 9(1), pages 51-74, January.
- Harvey, Campbell R, 1995. "The Risk Exposure of Emerging Equity Markets," World Bank Economic Review, World Bank Group, vol. 9(1), pages 19-50, January.
- Chowdhry, Bhagwan & Nanda, Vikram, 1998. "Leverage and Market Stability: The Role of Margin Rules and Price Limits," The Journal of Business, University of Chicago Press, vol. 71(2), pages 179-210, April.
- Bekaert, Geert & Harvey, Campbell R., 1997. "Emerging equity market volatility," Journal of Financial Economics, Elsevier, vol. 43(1), pages 29-77, January.
- Geert Bekaert & Campbell R. Harvey, 1995. "Emerging Equity Market Volatility," NBER Working Papers 5307, National Bureau of Economic Research, Inc.
- Bekaert, Geert, 1995. "Market Integration and Investment Barriers in Emerging Equity Markets," World Bank Economic Review, World Bank Group, vol. 9(1), pages 75-107, January.
- Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
- Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993. "On the relation between the expected value and the volatility of the nominal excess return on stocks," Staff Report 157, Federal Reserve Bank of Minneapolis.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Errunza, Vihang, et al, 1994. "Conditional Heteroskedasticity and Global Stock Return Distributions," The Financial Review, Eastern Finance Association, vol. 29(3), pages 293-317, August.
- Susan Thomas, 1995. "Heteroscedasticity models on the BSE," Finance 9507007, EconWPA.
- Ma, C.K. & Rao, R.P. & Sears, R.S., 1989. "Volatility, Price Resolution, And The Effectiveness Of Price Limits," Papers t7, Columbia - Center for Futures Markets.
- Beller, Kenneth & Nofsinger, John R, 1998. "On Stock Return Seasonality and Conditional Heteroskedasticity," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 21(2), pages 229-246, Summer.
- Kenneth Beller & John R. Nofsinger, 1998. "On Stock Return Seasonality And Conditional Heteroskedasticity," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 21(2), pages 229-246, 06.
- Claessens, Stijn & Dasgupta, Susmita & Glen, Jack, 1995. "Return Behavior in Emerging Stock Markets," World Bank Economic Review, World Bank Group, vol. 9(1), pages 131-151, January.
- Elyasiani, Elyas & Mansur, Iqbal, 1998. "Sensitivity of the bank stock returns distribution to changes in the level and volatility of interest rate: A GARCH-M model," Journal of Banking & Finance, Elsevier, vol. 22(5), pages 535-563, May.
- Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
- Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-547, August.
- Engle, Robert F & Lilien, David M & Robins, Russell P, 1987. "Estimating Time Varying Risk Premia in the Term Structure: The Arch-M Model," Econometrica, Econometric Society, vol. 55(2), pages 391-407, March.
- Mauro Mecagni & Maged Sawky Sourial, 1999. "The Egyptian Stock Market; Efficiency Tests and Volatility Effects," IMF Working Papers 99/48, International Monetary Fund.
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:yca:wpaper:2002_6. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Support)
If references are entirely missing, you can add them using this form.