Abstract
This paper is concerned with modeling the occurrences of stock price uncertainty of Dhaka Stock Exchange. Daily closing prices of three different banks are selected for analysis. This report focuses on the overall condition of the stock market to find out the amount of probability of uncertainty of occurrences by analytically chosen model to the financial data of Banking Sector (leading three Banks of Bangladesh: AB Bank, City Bank and National Bank). Various popular variability-forecasting models with techniques of measuring and evaluating performance of forecasting were reviewed. In this research, a trinomial probability distribution model is fitted considering the outcome (closing price) of a stock (per day) such as low, unchanged and high for the quoted three banks. Maximum likelihood estimations are derived for estimating the parameters of the model. To check the model acceptability chi-square goodness-of-fit test is conducted. It is found that the probability of occurrences of unchanged price for AB bank is low (0.014). On the other hand the probability of occurrence of high and low price are high (0.478 and 0.508) and these probabilities are almost same for the other banks (City and National bank).
Highlights
Development such as financial development, economic development etc. of a country depends on making policy of this country and interest in financial markets and the possibility to forecast their course is connected to the growing recognition among economists, financial analysts and policy makers because of the increasing impact of financial variables on the macro economy
We can conclude that the return from the National bank is high as the average is high which means that more and more price increases
We can say the risk is minimum for National bank than City bank and AB bank
Summary
Development such as financial development, economic development etc. of a country depends on making policy of this country and interest in financial markets and the possibility to forecast their course is connected to the growing recognition among economists, financial analysts and policy makers because of the increasing impact of financial variables on the macro economy. Stock markets tend to be very efficient in the allocation of capital to its highest value users. These markets help increase savings and investment, which are essential for economic development. By allowing diversification across a variety of assets, helps to reduce the risk of the investors must bear, reducing the cost of capital, which in turn spurs investment and economic development. In a stock market, which is informatively inefficient, investors face difficulty in choosing the optimal investment as information on corporate performance is slow or less available. Rigorous empirical studies examining the efficiency and other characteristics of these markets would be of great benefit to investors and policy makers at home and abroad. According to Kim, exchange rate is one of the major determinants of business Profitability and equity prices
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