Return Behavior of Banking Sector Stocks in Bangladesh

Abstract

The report is on Return Behavior of Banking Sector Stocks in Bangladesh. After independence Bangladesh Bank has been regulating the whole Banking System of Bangladesh. There are 30 commercial banks listed on Dhaka Stock Exchange. In this report, I am trying to find out yearly returns of banks stock using three important behavior techniques. The report discusses return differences of stocks year by year. Fast of all we collect all the information to determine the yearly returns. For calculating yearly returns, I use rate of return, holding period return, and absolute return techniques. Based on these techniques I find detail yearly returns. But holding period returns show a different picture. The average holding period returns were 1.41%, 0.48%, and 0.30% respectively years 2017, 2018, and 2019. In holding period returns, most of the banks return percentage was positive. It indicates that if the investor holds the stocks for a longer period of time it decreased losses. The highest holding period return was 3.29%, 1.93%, and 1.92% respectively years 2017, 2018, and 2019. Lowest holding period was 0.06%, -0.37% and 0.37% respectively years 2017, 2018 and 2019. The average absolute return and rate of return were 34.15%, -14.21%, and -17.13% respectively years 2017, 2018, and 2019. Where most of the banks return was negative in 2018 and 2019 but 2017 was a positive return. The highest absolute returns and rate of return were 129.72%, 23.39% and 19.55% respectively years 2017, 2018, and 2019. The lowest absolute returns and rate of return were -18.85%, -37.16%, and -36.81% respectively years 2017, 2018, and 2019. After saw graphical representation I found that banks' return performance decreasing year by year. In 2017, most of the bank performance was good. But in 2018, some banks maintain good performance but most of the banks outperform. In 2019, all the banks' performance was not good. Few banks still maintain only a certain margin. For more accurate result I use monthly compound returns for year 2019. I find average monthly return for year 2019 was 0.67%, -0.35%, -0.41%, -0.17%, 0.56%, -0.20%, -0.18%, -0.32%, 0.07%,-0.18%,-0.04% and -0.37% for respective months. Highest monthly returns was 2.43%, 1.54%, 1.75%, 0.82%, 2.29%, 0.48%, 0.60%, 0.12%, 0.90%, 0.77%, 0.88% and 0.36% for respective months. Negative returns was -1.25%, -0.85%, -1.37%, -1.23%, -0.76%, -1.01%, -0.88%, -0.77%, -0.65%, -1.61%, -1.39% and -0.86% for respective months. But After measuring compound monthly growth rate and daily absolute return on 2019, I saw almost all banks have negative return pattern. In 2019 the positive returns was higher than the negative returns.