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org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.7, No.18, 2016

Analysis on Factors that Affect Stock Prices: A Study on Listed

Cement Companies at Dhaka Stock Exchange

Shafiqul Alam1* Md. Rubel Miah2 and Md. Abdul Karim3

1. Assistant Professor, Department of Business Administration, Noakhali Science and Technology

University, Noakhali-3814, Bangladesh.
2. Lecturer, Department of Business Administration, Noakhali Science and Technology University,
Noakhali-3814, Bangladesh.
3. BBA (Major in Finance), University of Dhaka, Dhaka-1000, Bangladesh.
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.

1. Introduction

Stock Market is considered one of the major indicators of an economy. After independence, our stock market has
witnessed several debacles without any rational reason. Recently, the consistent manipulations and interventions
of different gambler and regulatory authorities fueled the major damage of 2010 in Bangladesh Capital Market.
Hence, the confidence of investors was shattered and most of small and midcap investors refrained themselves
from the market. For this a study on capital market and its related exposure was necessary. Current investors are
lacking confidence amid clear market directions from regulatory and concerned parties. Recently it has been
noticed that the market turnover is concentrated to some particular industries like Pharmaceuticals, Fuel &
Power, Cement and Engineering. The newly Issued IPO’s often create some potential short term momentum but
that hardly last for longer period of time and sometimes fail to short term gain also. The market is highly volatile
and investors are highly interested in booking short term profits. For this, consistent offloading of shares forced
most of the scarps to lose value. In light of these facts, the present study attempts to investigate the impact of six
major variables on the market price of shares of firms of Cement Industry listed in the Dhaka Stock exchange.

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Despite turmoil in capital market, some potential investors are relying on the capital market as Bangladesh
economy lacks investment opportunity. Besides, the share investment enables to create diversification of funds
and to generate a better yield than money market instruments. It is a generally accepted phenomenon that
investors are risk averse and they concern about the volatility of their funds. From the view point of an investor,
it is recommended that they have potential knowledge and awareness about the market movements and
determinants of the movements. Scholars have attributed several internal factors and external factors as factors
affecting stock price of cement or any other industries. The major internal factors are company performance,
governance, asset and liquidity position, dividends and earnings. The external factors include governmental
regulations, business cycle, investor’s attitude, market conditions, natural calamities and political uncertainties
like strikes, blockades etc. Investors have also been recommended to have an eye on the “Value Investing
Strategy” an investment mechanism proposed by Graham and Dodd (1934). Advocates of the strategy claim that
this has been successful in global crisis and investors often outperform that growth stock of the market. This is
another successful investment strategy resorted to especially after the global financial crisis and according to this
strategy the investor has to examine firms with a low price earnings stocks, low price-to-cash-flow ratio or low
price to book ratio stocks as it is assumed that these stocks may outperform growth stocks. Sharma (2011)
suggests that there are two approaches namely the fundamental approach and technical approach for predicting
share prices. For the fundamental factors the Earning Per Share, Net Asset Value Per Share and Price Earnings
have been recommended while the technical factors highlighted the Gross Domestic Product, Consumer Price
Index and Interest Rate Spread as the determinants of stock prices globally. The earlier one predicts share price
on the basis of financial, environmental and managerial factors, whereas the latter studies the past trends in
predicting future share price. Therefore, it is imperative for investors to be talented about the different
approaches and factors surrounding their investment decisions.

2. Objectives of the Study

The prime objective of this study is to examine the determinants that affect stock prices in Dhaka Stock
Exchange. The objective of this study is to determine the impact of fundamental factors (EPS, NAVPS, and P/E)
on market prices and the impact of technical factors (GDP, CPI & IRS) on market prices.

The study also aims at creating awareness among present and potential investors to consider these factors prior to
trade and inject funds on securities to avoid unexpected loss by the fluctuations of these factors.

3. Research Questions

As a result of the objectives stated above the following research questions will be asked. These are:
To what extent do the fundamental factors (EPS, NAVPS & P/E) of Cement Companies listed on the
Dhaka Stock Exchange have positive significant impact on their stock prices?
To what extent do the macro-economic factors (GDP, CPI & IRS) have positive significant impact on
their stock prices of Cement Companies listed on the Dhaka Stock Exchange?

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4. Research Hypothesis

The research questions raised above therefore led to the formulation of the following hypothetical statements.
These are:
EPS does not have positive and significant impact on stock prices of Bangladeshi Cement Companies.
NAVPS does not have positive and significant impact on stock prices of Bangladeshi Cement
Companies.
P/E does not have positive and significant impact on stock prices of Bangladeshi Cement Companies.
GDP does not have positive and significant impact on stock prices of Bangladeshi Cement Companies.
CPI does not have positive and significant impact on stock prices of Bangladeshi Cement Companies.
IRS does not have positive and significant impact on stock prices of Bangladeshi Cement Companies.

5. Model Specification

Prior to given input, the summary statistics was developed. The regression model was run for dependent variable
against the independent variable. The independent variables for fundamental factors are Earnings Per Share
(EPS), Price Earnings (P/E) and Net Asset Value per share (NAVPS) in line with works of Nishat and lrfan
(2002). This provided a crude test of the fundamental factors that affect the stock prices. Thus, in line with the
various hypotheses stated, the models were as follows:
Stock Prices: β0+β1 (EPS) +β2 (NAVPS) +β3 (P/E) + Ɛ.
The variables in the model have been used as the fundamental factors. The study later made a broad discussion
on the technical factors that affect the stock Prices as well. Following Table provides an overview of the
variables used, definition of variables employed and the hypothesized sign.

Fundamental Factors of Stock Prices

Variables Definition Symbols

Earnings Per Share Net profit after Tax/ Total Share Outstanding EPS

Price Earnings Market price/Earnings per share P/E

Net Asset Value Per Share Net Asset/ Total Share Outstanding NAVPS
Stock/Share Price
Constant 0
Standard Errors Ɛ

The equation for technical factors would be following in the analysis:

Stock Prices: β0+β1 (RGDP) + β2 (CPI) + β3 (IRS) + Ɛ.

Following Table provides an overview of the variables used, definition of variables employed and the hypothesized sign.
Technical Factors of Stock Prices

Variables Definition Symbols

RGDP Growths in Gross domestic Production GDP
Inflation A benchmark of the variation in prices paid by typical CPI
consumers for goods and other items in different times.
Interest Rate Spread The Deviation between the deposit rates and rate of loans IRS
and advances
Stock/share Price
Constant 0
Standard Errors Ɛ

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6. Literature Review

There are several factors that have been instrumental as determinants of stock prices. The investigation on
determinants of stock prices was first initiated by Collins (1957) for the US market and he identified dividend,
net profit, operating earnings and book value as the prominent factors affecting share prices in the US. Ever
since, a significant body of theoretical and empirical literature has evolved that considers the determinants of
market price of shares. After that several studies have been undertaken empirically by several researchers.
Among these, Irfan and Nishat (2002) identified factors exerting impact on the share prices in Karachi Stock
Exchange for the period between 1981 and 2000. The study employed cross-sectional weighted least square
regression and analyzed the impact of six variables viz. dividend yield, price earnings, earnings per share,
leverage and earning volatility on share prices. Of these the payout ratio, size, leverage and dividend yield
emerged as the significant factors affecting the stock market prices in Karachi. This suggests that firm specific
factors have a significant impact on market price of shares, cited in Sharif et al. 2015.
In Asian Subcontinent, Das and Pattanayak (2009) undertook an investigation constituting 30 shares of Bombay
Stock Exchange to find out the major determinants of stock price movements in India. The analysis evidenced
that higher return on investment; future growth potentials and economic sustainability often influence the share
price movements in India while uncertainties and price volatility infer negative impacts. Following them,
Ramachandran et al (2011) used panel data and examined three sectors namely auto, healthcare and public sector
undertakings over the period 2000-2009 in order to infer the main factors affecting share prices in India. The
study employed the fully modified ordinary least squares method and results revealed that dividend, price-
earnings ratio and leverage are major determinants of share prices for all the sectors under consideration cited in
Anike and Esther Amuche (2014).
A more focused study was initiated to investigate the impact of dividend and other control mechanism on share
prices by Islam and Jahan (2012) on the Bangladesh Capital Market. The study considered 30 commercial banks
and their dividend policies for the time 2007-2011 and ferreted out how the dividend polices influence the share
price. The study also refereed the earning per share as a dominant variable to influence the share price while
equity base as future potential for price movements.
Balkrishnan (1984), Zahir and Khanna (1982) and Sharma (2011) conducted investigation on book value per
share and market price per share of the stock. They asserted that higher book value per share indicates financial
soundness and promotes a healthy statement about the owner’s fund. They stated that investor believe that a firm
with higher financial base will generate higher EPS in future. Thus, most of them took a long position expecting
consistent performances from the firm.
From African Context Somoye, Akintoye, and Oseni (2009) conducted a survey on 130 companies traded in the
Nigerian stock exchange between 2001 and 2007 in order to analyze the impact of various macro-economic
factors on the market price of shares. The study employed OLS regression and Regressed stock prices on
earnings per share, dividend per share, oil price, gross domestic product, lending interest rate and foreign
exchange rate on stock price. All the variables revealed a positive correlation to stock prices with the exception
of lending interest rate and foreign exchange rate cited in Sharif et al. 2015. Although the studies of Zhao (1999)
on Chinese economy presented a negative relationship among Consumer Price Index (CPI), Industrial Outputs
and the share prices.
In Middle East the Gross National Production (GNP), Consumer Price Index (CPI), Interest Rate had been found
instrumental in influencing the stock prices by the study of Al-Qenae et al. (2002). The researcher considered the
time period 1981-1997. Among the studied variables, GNP and Earnings were found positive while CPI and
Interest Rate showed a negative impact on stock prices of Kuwait. The researcher alleged that the investors are
sentimental and emotionally unstable that forced them to be influenced by external factors while they undertake
an investment Decision.
Despite the studies showed an emergence on the issue, the findings were quite mixed in different market of
different regions. This is probably because of the geographical differences that portray different culture,
investors’ education rate, market analysis capacity and way of thinking. For this, the researcher here cannot
decide on a general statement whether all these factors are either positively or negatively related to stock prices.
There were not that many studies highlighting the issue of factors that affect stock prices on the Bangladesh

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capital market. This paper, therefore, will reduce the gap by studying six major variables and their extent of
dominance on the stock prices of Cement industry in Dhaka stock exchange.

7. Research Methodology

The report shows the credibility of investment opportunities to decide on the best investment style. About 7
listed cement companies were selected and their prices for last 10 years at the end of each quarter along with
EPS, NAVPS, P/E has been used to determine how significantly these factors influence the stock prices of
cement industry. Besides, an equation has been formed for investigating the impact of several macro-economic
factors GDP, CPI, IRS on stock prices of the concerned industry. Several statistical tools have been undertaken
to interpret the results.

7.1 Nature and Sources of Data

This study relied extensively on secondary data which was handpicked from the annual report and statement of
account of selected cement companies listed on the Dhaka Stock Exchange for the period 2006-2015. These data
have been collected from the official websites of Dhaka Stock Exchange and from the respective companies.
Some of the year’s data couldn’t be managed from the respective company. For this, the recorded statement of
Dhaka Stock Exchange has been used as an authentic source of evidences. Price data was taken from the DSE
library index Statistical Bulletin of the Dhaka Stock Exchange over earlier specified ten-year period. These data
were designed in excel form both for the day end and month end format. Researchers considered the month end
adjusted price data for the selected companies. A total number of 120 month’s end price information has been
used.

7.2 Population and Sample size

The population of the study consists of all the quoted cement companies in Bangladesh. The DSE listed security
chart presents that only 7 (among them 5 companies are local & 2 companies are multinational) companies are
listed in DSE as per the rules of Bangladesh Securities and Exchange Commission. The companies are Aramit
Cement (ARAMITCEM), Confidence Cement (CONFIDENCEM), Meghna Cement (MEGHNACEM), Premier
Cement (PREMIERCEM), M.I Cement (MICEMENT), Heidelberg Cement (HEIDELBERCEM) & Lafarge
Surma Cement (LAFSURMACEM). The research sample in this study was determined on the availability of
data from the quoted companies in the Dhaka Stock Exchange and ample data on the targeted variables to
determine the major factors of Stock Prices was found.

8. Variables Analysis

8.1 Earnings Per share

The following chart shows the Earnings per share of all the cement companies for the last ten years, 4 quarters in
every year. The synopses of the EPS of all the securities are following.

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80
60
40
20
0
-20 Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1
-40 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
-60

ARAMITCEM CONFIDENCEM HEIDELBERCEM LAFSURMACEM

MICEMENT MEGHNACEM PREMIERCEM

Figure: Quarterly EPS of cement Companies (2006-2015)

8.2 Net Asset Value per Share

The net asset value per share of all the cement companies has been determined by dividing the total equity by the
number of securities of the company for respective quarters of each year. The synopsis of data for net asset value
per share is following.
1400
1200
1000
800
600
400
200
0
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

ARAMITCEM CONFIDENCEM HEIDELBERCEM LAFSURMACEM

MICEMENT MEGHNACEM PREMIERCEM

Figure: Quarterly NAVPS of cement Companies (2006-2015)

8.3 Price Earnings

The price earnings (P/E) of all the stocks have been calculated by dividing the quarterly average market prices of
the company with the respective year’s earnings per share. The summary of Price Earnings has been outlined
following.

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100%
80%
60%
40%
20%
0%
-20% Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2
-40% 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
-60%
-80%
-100%

ARAMITCEM CONFIDENCEM HEIDELBERCEM LAFSURMACEM

MICEMENT MEGHNACEM PREMIERCEM

Figure: Quarterly P/E of cement Companies (2006-2015)

8.4 Stock prices

The quarterly adjusted stock prices of all the selected companies are summarized in the following chart. The
stock prices have been calculated by summarizing the month end data for last 120 months and make average of
them. The broad scenario of adjusted prices is shown in the appendix part of the report.
14000
12000
10000
8000
6000
4000
2000
0
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

ARAMITCEM CONFIDENCEM HEIDELBERCEM LAFSURMACEM

MICEMENT MEGHNACEM PREMIERCEM

Figure: Quarterly Stock Prices of cement Companies (2006-2015)

8.5 Technical Factors

As already mentioned, the researchers developed a technical model to show the regression relationship between
the variables. For the lack of availability of data and information, this model was developed based on quarterly
data of last five years (2011-2015). The data summary is presented on the following chart.

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12

10

0
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
2015 2014 2013 2012 2011

GDP(%) CPI (%) Interest Spread (%)

Figure: Technical Factors of Stock Prices

9. Model Justifications

This research work was based on the methodology of the Nishat and Irfan (2002) that conducted a study on the
impact of dividend policy and stock price volatility in Pakistan stock exchange’s securities and showed a
noticeable relationship between dividend and price volatility. The researcher showed an average coefficient of
13.23 times which indicates that the price is changed by 13.23 times for each unit changes in dividend with a
healthy confidence rate. The relationship was not reduced even after controlling for the above mentioned factors.
This suggests that dividend policy affect stock price volatility and it provides evidence supporting the arbitrage
realization effect, duration effect and information effect in Pakistan. Hence, the researchers used EPS, NAVPS
and P/E as proxy variables of independent variable of their model and stock price as the dependent variable in
fundamental equation while GDP growth rate, CPI and Interest Rate Spread have been replaced as independent
variables as proxy of dividend yield of Nishat’s model and stock price was fixed as dependent variable.

10. Data analysis techniques

For the analysis of the collected data, Pearson’s Product-Moment Correlation Coefficient was first used. In this
study, the variables are already mentioned where EPS, P/E & NAVPS have been considered as (x) and the
corresponding market prices per share (y). Secondly, Pooled OLS regression technique was used to examine the
relationship of between the independent variables (x) with dependent variable (y) and to know the effect of
independent variables on the dependent variable. Fixed Effect model of linear regression was explored to
determine the relationship between predictor and outcome variables within an entity (Price, EPS and NAVPS
etc.). Each entity has its own individual characteristics that may or may not influence the dependent variables.
Besides the random effect model has been formulated to show the variation across entities that are random and
uncorrelated with the predictor or independent variables. The Hausman test hypothesis has been run to decide on
which test provides the best plausible result. MS excel and STATA applications have been used to analyze the
price related data and information.

11. Ethical Issues

Ethical issues were watched out carefully. Researchers collected all the data to reduce distractions,
manipulations and distortions. Hence, these data are not expected to put a significant deviation on the result
analysis process. Apart from this, no data has been distorted and manipulated by the researchers. All the data and
information has been collected from the authentic sources like DSE reports and publications.

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12. Results Analysis

The regression results of the analysis have been developed. Here will be presenting both the
fundamental and technical equations to show how the stock prices are influenced by these
factors.

12.1 Fundamental Factors of Stock Prices

The fundamental factors of stock prices have been determined earlier which were the Earning Per share (EPS),
Net Asset Value per share (NAVPS) and price Earnings (P/E). Researchers coded six cement companies as
ARAMITCEM (111), CONFIDENCEM (222), HEIDELBERGCEM (333), LAFARSCEM (444), MICEMENT
(555), MEGHNACEM (666) and PRIMIERCEM (777). Total 280 observations (40 observation for each firm) of
seven companies of different periods (quarterly, from 2006-2015) have been paneled for testing. By cumulating
all these data, the Pooled linear regression model was developed followed by Fixed Effect and Random Effect
regression testing.

Model Analysis
The study also summarized the fixed and random effect model as well. The outcome is following of pooled,
fixed and random effect model is following.
Table: Coefficients of Fundamental Factors in different circumstances

Pooled Fixed Random

Coeffici- Probabi Std Coeffici- Probabi- Std Coeffici- Probabi- Std
ents lity Error ents lity Error ents lity Error
EPS 22.16 0.002* 6.955 -10.25 0.01* 3.968 -3.72 0.444 4.875
NAVPS 0.731 0.143 0.4979 -3.66 0* 0.3147 -2.73 0* 0.3795
P/E 0.1804 0* 0.042 0.098 0* 0.022 0.1164 0* 0.028
Adjusted R
0.1142 0.4582 0.894
Square

Hence, the model under pooled OLS looks like

Stock Prices= 576.82+22.16 (EPS) +.1804(P/E) +.731(NAVPS) +78.14
This indicates that there is constants value of 576 of stock prices. For 1 taka EPS, the stock prices of cement
companies enhanced by 22.16 taka while only .73 and .18 taka price increases for every 1 taka of NAVPS and
P/E respectively. All the variables except NAVPS have probability below 5% that indicates the model is well
formulated as these variables are significant. The adjusted R square .1142 which indicates that the model
explains the variability of the responses of data around the mean with 11.42% confidence level. The detailed
outcomes are posted in Appendix I under pooled regression model.

For the fixed effect model analysis, the data set had to be declared as panel data by the x-test command in
STATA. This helped to make the model strongly balanced. When using fixed effect, it has been assumed that
something within the individual may impact or bias the predictor or outcome variables and the study needs
control over this. This is the rationale behind the assumption of the correlation between entity’s error term and
predictor variables. Fixed effect removed the effect of different time-invariant characteristics from the dependent
variables so that the researchers can consider the net effect of the dependent variable.
Here all coefficients have significant values (not equal to zero) and the probability is less than 5%. This supports
that the model is vibrant to explain the changes in outcome variables. The equation of the model will be,

Stock Prices= 1115.64-10.25 (EPS) +.098 (P/E) – 3.6659(NAVPS) + 45.2071

The co-efficient constant is 1115.64 and by reducing the individuality and heterogeneity effect by fixed model
now it has been found that 1 taka EPS lowers the stock prices by 10.25 taka in DSE which was positive 22.16

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taka in pooled model while NAVPS reduces the prices by 3.66 for every unit. Only P/E provided a positive
relationship with the stock prices.

Finally, Random effects assumed that the entity’s error term is not correlated with the variables which allows for
time-invariant variables to play a role as explanatory variables. The summary of the results goes following. In
this model, the probability of EPS is greater than 5% that indicates all the other variables are significant to
explain the model while EPS was significant in other two models.

Stock Prices= 1002.12-3.72 (EPS) +.1164(P/E) -2.73(NAVPS) + 122.19

The co-efficient constant is 1002.12 and by reducing the individuality and heterogeneity effect by fixed model
now it has been found that 1 taka EPS lowers the stock prices by 3.72 taka in DSE while NAVPS reduces the
prices by 2.73 for every unit.

The Hausman Test

Historically, Fixed Effect Model provides statistically better results than Random Effect Model. The EPS and
NAVPS both are negatively related to stock prices in both cases although in reality the stock prices are enhanced
because of EPS. This is probably because of time variant as researchers considered the estimated time of EPS
and stock prices at the period while EPS is normally declared later and stock prices are influenced at that
particular period. Now it is to be estimated that which model in this set is suitable. For this researchers had to test
the model through Hausman hypothesis test. This has also been done using STATA by storing the values of both
the random and fixed model.

Hausman Test on Fundamental Factors

Coefficients
(b) Fixed (B) Random (b-B) Differences Sqrt (diag(V_b-V_B)
EPS -10.25 -3.72 -6.53 -
NAVPS -3.66 -2.73 -0.93 -
P/E 0.098 0.1164 -0.0184 -
b=consistent under H0 and H1;Obtained from xtreg
B=Inconsistent under H1, Efficient under H0; Obtained from xtreg
Test: H0: Difference in coefficients not symmetric

The above table is the summary of Hausman model where the null hypothesis (H0) was that the random effect
model is appropriate and alternative (H1) hypothesis was about the fixed effect model. Here, the random effect
model is effective under the null hypothesis. Hence, the random effect model is effective to explain the changes
in share prices. In the random effect model, the EPS is only insignificant while other variables are significant to
explain the changes successfully.

12.2 Technical Factors of Stock Prices

For the technical factors of stock prices, the study selected Gross Domestic Product, Inflation Rate and Interest
Rate Spread for the last five year’s each quarters. Again, the pooled model of regression has been developed to
see the overall impact of variables on stock prices. The summary of pooled regression, fixed and random model
is following.

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Coefficients of Technical Factors in different circumstances

Pooled Fixed Random

Coefficients Probability Std Error Coefficients Probability Std Error Coefficients Probability Std Error

GDP -216.34 0.575 385.19 -216.34 0.172 157.44 -216.34 0.169 157.44

CPI -119.44 0.304 115.68 -119.44 0.013* 47.28 -119.44 0.012* 47.28

Interest Spread 213.67 0.666 493.25 213.67 0.291 201.6 213.67 0.289 201.6

Adj R Square 0.0112 0.0107 0.0107

Hence, the model under pooled OLS looks like

Stock Price=1175.66-216.33 (GDP)-119.44 (CPI) +213.67(Interest Spread)
This indicates that there is constants value of 1175.667 of stock prices. For 1% GDP changes, the stock prices of
cement companies reduced by 216.33 taka while 119.44 taka in price is reduced for every 1% changes of
Consumer Price Index and 213.67 taka price is increased for 1% interest spread is reduced between the deposit
rate and advance rate. The coefficient values for all the models are same as there were no significant differences
in the independent variables over the time. All the variables have probability over 5% under pooled system
while only Consumer Price Index (CPI) has less than 5% probability in random and fixed effect model. The
adjusted R square is significant that indicates that the variables are not good enough to explain the variability in
stock prices. The standard error had different values in different methods.

Although the coefficients are same like the pooled regression model, the RSquare is significant to explain the
variability of stock prices through these variables under fixed effect model. The probability of Consumer Price
Index is significant as it is below 5%.
As said, the random effect model renders identical coefficient for variables as the variables are all equal for all
the firms. Again, the Consumer Price Index is the only significant variables to explain the variability of share
prices as the probability is sharply below down to 5%. The overall R square is only 1% that explains the
variability of stock prices around the mean.

The Hausman Test

The Hausman test of technical factors in respect to the stock prices of cement industry is following.

Hausman Test on Technical Factors

Coefficients
(b) Fixed (B) Random (b-B) Differences sqrt(diag(V_b-V_B)
GDP -216.34 -216.34 -2.67E-12 0.00000151
CPI -119.44 -119.44 -5.97E-13 3.16E-06
Interest Spread 213.67 213.67 -3.41E-12 0.0000237
b=consistent under H0 and H1;Obtained from xtreg
B=Inconsistent under H1, Efficient under H0; Obtained from xtreg
Test: H0: Difference in coefficients not symmetric

The above table is the summary of Hausman model where the null hypothesis (H0) was that the random effect
model is appropriate and alternative (H1) hypothesis was about the fixed effect model. Here, the random effect
model is effective under the null hypothesis. Hence, the random effect model is effective to explain the changes
in share prices. In the random effect model, only CPI is significant whereas other variables are insignificant to
explain the changes successfully.

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13. Conclusions

The study aims at examining the determinants of market price of shares of cement companies listed in the Dhaka
stock exchange. Related data was gathered for the period 2006-2015 from the Dhaka Stock exchange Archives.
A set of panel data for 7 companies designed that was extended to 280 observations by segregating the data set
into quarterly. The analysis is focused on Pooled OLS regression with Fixed Effect and Random Effect models.
Thus, the study draws out a relationship of market price of shares with six other variables namely EPS, NAVPS,
P/E, GDP, CPI and IRS. The findings are quite instrumental and identical with the empirical findings. The EPS,
NAVPS, P/E and CPI has been found most significant while other variables were not that much significant.
This Study renders a clear-cut message to the investors of Bangladesh Capital Market that they should be
watching out the financial base and earning growths of a firm. It is also recommended that investors monitor the
PE ratio and Macro-economic factors before they expand their portfolio. Bangladesh is an emerging economy
and it is imperative to conduct studies which will benefit the investor to make rational investments. The results
can be considered reliable as it has included all the listed companies of cement industry in Dhaka Stock
Exchange.
There were potential limitations identified by the researcher while the hypothesis testing was going on. The
investor’s sentiment and biasness have impact on the stock price volatility although there is no set benchmark to
measure the investor’s sentiment. The infatuations and lack of investment knowledge often lead an investor to
invest irrationally in firms that lack potentials and growth probabilities. This study lacks directions for these
investors. Otherwise, the authenticity and reliability of data will help the potential investors to decide on right
investment vehicles. This study opens an opportunity for future researchers to study the Macro and Micro
economic factors comprehensibly in relation with Market Prices of Stocks.

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Appendices
Appendix 01: Quarterly Data of different fundamental and technical Factors
Quarterly EPS of listed Cement companies (2006-2015)
ARAMITCEM CONFIDENCEM HEIDELBERCEM LAFSURMACEM MICEMENT MEGHNACEM PREMIERCEM

Q4 0.45 -3.98 5.83 0.49 1.02 1.36 1.25

Q3 -0.08 0.59 4.01 0.32 0.76 0.11 0.81

2015
Q2 0.27 1.83 6.26 0.66 1.09 1.35 0.27

Q1 0.18 1.56 8.71 0.5 0.87 2.31 0.32

Q4 -0.18 0.8 2.96 0.61 1.13 -0.54 0.14

Q3 0.07 1.02 3.46 0.61 0.68 0.47 0.76

2014
Q2 0.45 1.37 7.3 0.67 1.16 2.8 1.02

Q1 0.17 2.13 7.16 0.54 0.92 1.75 0.23

Q4 1.52 2.52 1.55 0.97 1.62 0.51 0.29

Q3 0.13 1.41 6.62 0.31 1.06 0.25 1.18

2013
Q2 0.34 1.86 9.59 0.31 0.97 3.28 0.12

Q1 0.57 2.3 8.33 0.6 1.11 1.19 0.33

Q4 0.83 -3.95 -13.08 -1.01 -3.58 -3.46

Q3 0.95 1.16 4.56 0.23 1.39 1.14

2012
Q2 0.68 2.04 2.34 0.34 0.89 0.67

Q1 0.57 0.75 6.18 0.44 1.30 1.65

Q4 0.65 -3.08 -11.14 33.25 1.45 -1.13

Q3 0.89 1.18 19.39 -12.78 1.31 0.56

2011
Q2 1.02 1.01 30.00 -11.88 0.23

Q1 0.74 0.89 55.02 -11.05 0.34

Q4 1.11 -4.97 20.12 -12.77 -1.30

Q3 1.03 1.98 11.12 -5.15 0.12

2010
Q2 1.94 2.34 28.00 -3.12 0.31

Q1 1.59 0.65 18.44 -7.18 0.87

Q4 15.53 -3.79 31.42 3.86 -4.64

Q3 13.52 2.35 28.23 12.62 2.31

2009
Q2 9.36 0.34 46.53 8.89 1.15

Q1 4.94 1.10 44.41 -8.23 1.18

Q4 0.35 6.79 40.74 1.24 -6.98

Q3 0.59 2.34 23.07 3.60 2.34

2008
Q2 0.41 -5.67 11.53 3.36 3.45

Q1 0.31 -3.46 29.52 -5.16 1.19

Q4 3.21 -19.11 43.19 -0.73 -51.97

Q3 2.56 4.34 15.53 -15.53 18.45

2007
Q2 2.69 7.56 18.69 4.61 14.56

Q1 1.55 7.21 32.59 -7.23 18.96

Q4 0.52 -20.13 47.63 -1.35 -35.55

Q3 0.97 11.56 25.53 4.23 9.23

2006
Q2 1.93 3.23 12.32 -8.95 17.65

Q1 1.56 5.34 11.52 -7.85 8.67

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Quarterly NAVPS of listed Cement companies (2006-2015)

ARAMITC CONFIDENC HEIDELBER LAFSURMA MICEME MEGHNACE PREMIERC

EM EM CEM CEM NT M EM
Q4 14.98 69.54 102.27 12.37 39.59 37.28 31.45
Q3 14.86 68.39 103.46 12.58 39.02 35.62 30.45
2015
Q2 14.49 65.3 108.62 12.62 38.32 36.42 29.93
Q1 14.45 64.42 111.82 11.35 39.24 37.51 29.54
Q4 15.49 64.41 115.46 11.41 38.22 36.1 28.62
Q3 13.34 64.26 117.09 12.21 37.69 35.68 29.08
2014
Q2 16.54 65.24 123.62 11.78 38.91 36.54 29.43
Q1 15.53 64.98 127.92 10.39 37.09 37.65 28.75
Q4 16.22 65.11 132.58 9.51 37.67 35.09 27.84
Q3 15.65 64.34 119.65 8.54 38.76 35.61 26.79
2013
Q2 14.5 63.72 117.86 7.65 39.74 32.45 25.72
Q1 13.49 59.49 114.92 6.89 38.91 34.52 23.45
Q4 14.65 56.74 111.49 6.19 40.28 33.81
Q3 14.65 62.46 106.72 7.61 44.12 32.29
2012
Q2 13.99 66.87 102.32 5.93 47.23 33.42
Q1 14.07 68.79 98.72 4.87 46.72 31.23
Q4 12.79 67.07 93.13 4.44 50.28 30.03
Q3 12.87 69.25 87.55 4.56 49.54 31.52
2011
Q2 13.08 73.61 82.53 4.53 28.59
Q1 12.89 81.23 83.29 4.86 29.56
Q4 9.443 79.85 84.18 4.767 29.84
Q3 11.68 81.56 87.52 5.26 32.59
2010
Q2 29.85 85.26 81.86 5.39 28.93
Q1 31.52 87.59 712.53 75.87 30.26
Q4 47.75 89.48 703.05 76.3 29.92
Q3 36.52 74.59 690.78 67.49 26.53
2009
Q2 24.13 67.53 648.53 62.97 226.45
Q1 28.29 341.52 617.52 60.26 247.63
Q4 16.4 330.67 585.46 59 255.49
Q3 12.56 301.25 601.23 57.85 267.53
2008
Q2 9.56 312.53 558.95 58.59 268.46
Q1 11.25 332.15 567.26 55.39 268.46
Q4 14.67 345.66 505.6 56.03 275.2
Q3 17.54 338.56 485.26 56.03 275.2
2007
Q2 13.56 319.52 448.39 56.03 288.59
Q1 11.26 317.26 451.83 57.29 301.56
Q4 8.95 332.93 436.37 68.31 320.42
Q3 8.95 318.09 436.37 66.91 321.19
2006
Q2 7.56 324.29 445.85 63.54 327.96
Q1 9.23 315.26 449.36 58.59 333.61

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Quarterly Price listed Cement companies (2006-2015)

CONFIDENCE
ARAMITCEM M HEIDELBERCEM LAFSURMACEM MICEMENT MEGHNACEM PREMIERCEM

Q4 411 867 5621 746 85.4 534.5 76.8

Q3 433 903 6402 1076 79.8 574.5 87.4

2015
Q2 254 764 5703 1181 76 555.5 59

Q1 278 934 4503 1145 66.3 551.5 63.1

Q4 390 1067 4994 1230 72.2 605.5 80.9

Q3 452 1242 5314 1373 84.3 635.5 84.8

2014
Q2 450 1191 5085 833 86 589.5 84.8

Q1 545 1359 4219 497 84.1 688 90.7

Q4 843 1239 3807 335 78.2 714 99.6

Q3 763 1190 3784 332 90.6 669 101.9

2013
Q2 759 1295 3350 328 90.5 533 109.9

Q1 649 995 2371 300 71.3 467.5 75.6

Q4 639 1049 2647 329 82.9 524 0

Q3 823 1182 2685 365 119.1 634.5 0

2012
Q2 829 1109 2387 399 108.6 662.5 0

Q1 1040 1333 2118 301 108.5 678.5 0

Q4 1168 1245 2559 266 110.5 698 0

Q3 1157.75 1527 3000 614 170.1 923.5 0

2011
Q2 1194.25 1814 3040 489 176.8 1141.5 0

Q1 1345.5 2640 3246.25 430.75 0 1392.5 0

Q4 1591 2934 3659.25 563.75 0 1730 0

Q3 1932.75 2861 3843.75 718.5 0 2099.5 0

2010
Q2 1098.5 1667 3133.5 444.5 0 2090.75 0

Q1 740.25 1533.3 2440.25 459 0 1307.25 0

Q4 565.25 1398.25 2152.5 505 0 1304 0

Q3 441 659 1699.5 488 0 772 0

2009
Q2 216 515.5 1429.25 542.25 0 579 0

Q1 251 411.25 1198.25 429.5 0 534 0

Q4 177.5 318.25 1214 513 0 386 0

Q3 171.75 290.75 1234 589.5 0 393.25 0

2008
Q2 222.25 427.25 1406.75 523 0 564.25 0

Q1 251 479.75 1375.75 573.25 0 401.25 0

Q4 150.75 369 1204.75 480.75 0 352.25 0

Q3 152 375.5 1248.25 415.25 0 330 0

2007
Q2 87 409.25 1147 385 0 271 0

Q1 67 219 741.5 427.75 0 273.75 0

Q4 73.25 138.5 647.25 391.75 0 276.75 0

Q3 85 145.25 700.5 435.75 0 294 0

2006
Q2 55 118 437.75 328.25 0 255 0

Q1 50.25 130 553.25 356.25 0 285 0

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Quarterly P/E data on Cement companies

CONFIDENC
ARAMITCEM EM HEIDELBERCEM LAFSURMACEM MICEMENT MEGHNACEM PREMIERCEM

Q4 913.33 -217.84 964.15 1522.45 83.73 393.01 61.44

Q3 -5412.50 1530.51 1596.51 3362.50 105.00 5222.73 107.90

2015
Q2 940.74 417.49 911.02 1789.39 69.72 411.48 218.52

Q1 1544.44 598.72 516.99 2290.00 76.21 238.74 197.19

Q4 -2166.67 1333.75 1687.16 2016.39 63.89 -1121.30 577.86

Q3 6457.14 1217.65 1535.84 2250.82 123.97 1352.13 111.58

2014
Q2 1000.00 869.34 696.58 1243.28 74.14 210.54 83.14

Q1 3205.88 638.03 589.25 920.37 91.41 393.14 394.35

Q4 554.61 491.67 2456.13 345.36 48.27 1400.00 343.45

Q3 5869.23 843.97 571.60 1070.97 85.47 2676.00 86.36

2013
Q2 2232.35 696.24 349.32 1058.06 93.30 162.50 915.83

Q1 1138.60 432.61 284.63 500.00 64.23 392.86 229.09

Q4 769.88 -265.57 -202.37 -325.74 -23.16 -151.45

Q3 866.32 1018.97 588.82 1586.96 85.68 556.58

2012
Q2 1219.12 543.63 1020.09 1173.53 122.02 988.81

Q1 1824.56 1777.33 342.72 684.09 83.46 411.21

Q4 1796.92 -404.22 -229.71 8.00 76.21 -617.70

Q3 1300.84 1294.07 154.72 -48.04 129.85 1649.11

2011
Q2 1170.83 1796.04 101.33 -41.16 4963.04

Q1 1818.24 2966.29 59.00 -38.98 4095.59

Q4 1433.33 -590.34 181.92 -44.15 -1330.77

Q3 1876.46 1444.95 345.66 -139.51 17495.83

2010
Q2 566.24 712.39 111.91 -142.47 6744.35

Q1 465.57 2358.92 132.33 -63.93 1502.59

Q4 36.40 -368.93 68.51 130.83 -281.03

Q3 32.62 280.43 60.20 38.67 334.20

2009
Q2 23.08 1516.18 30.72 61.00 503.48

Q1 50.81 373.86 26.98 -52.19 452.54

Q4 507.14 46.87 29.80 413.71 -55.30

Q3 291.10 124.25 53.49 163.75 168.06

2008
Q2 542.07 -75.35 122.01 155.65 163.55

Q1 809.68 -138.66 46.60 -111.09 337.18

Q4 46.96 -19.31 27.89 -658.56 -6.78

Q3 59.38 86.52 80.38 -26.74 17.89

2007
Q2 32.34 54.13 61.37 83.51 18.61

Q1 43.23 30.37 22.75 -59.16 14.44

Q4 140.87 -6.88 13.59 -290.19 -7.78

Q3 87.63 12.56 27.44 103.01 31.85

2006
Q2 28.50 36.53 35.53 -36.68 14.45

Q1 32.21 24.34 48.03 -45.38 32.87

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Quarterly Data on Technical Factors (2011-2015)

GDP (%) CPI (%) Interest Spread (%)
2015 Q4 2.01 6.1 4.84
Q3 1.15 6.24 4.82
Q2 1.62 6.25 4.79
Q1 1.73 6.27 4.87
2014 Q4 1.97 6.11 4.98
Q3 1.34 6.84 5.14
Q2 1.19 6.97 5.31
Q1 1.62 7.48 5.15
2013 Q4 1.02 7.35 4.98
Q3 2.04 7.13 4.89
Q2 1.23 8.05 4.97
Q1 1.72 7.71 5.02
2012 Q4 1.89 7.14 4.56
Q3 2.05 4.96 4.77
Q2 1.2 8.56 4.92
Q1 1.38 10.1 4.63
2011 Q4 1.56 7.28 4.56
Q3 1.37 6.89 4.27
Q2 1.98 7.07 4.98
Q1 1.55 5.64 5.07

Appendix 02: Outcomes of STATA

Fundamental Factors
Pooled OLS

Source SS df MS Number of obs = 280

F( 3, 276) = 12.99
Model 42147911.6 3 14049303.9 Prob > F = 0.0000
Residual 298548928 276 1081699.01 R-squared = 0.1237
Adj R-squared = 0.1142
Total 340696840 279 1221135.63 Root MSE = 1040

shareprice Coef. Std. Err. t P>|t| [95% Conf. Interval]

eps 22.16259 6.955073 3.19 0.002 8.47086 35.85432

navps .7317398 .4979764 1.47 0.143 -.2485747 1.712054
pe .1804016 .0420308 4.29 0.000 .0976599 .2631433
_cons 576.8226 78.14776 7.38 0.000 422.9812 730.664

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Fixed Effect Model

Fixed-effects (within) regression Number of obs = 280

Group variable: companycode Number of groups = 7

R-sq: within = 0.4582 Obs per group: min = 40

between = 0.9191 avg = 40.0
overall = 0.0200 max = 40

F(3,270) = 76.11
corr(u_i, Xb) = -0.6353 Prob > F = 0.0000

shareprice Coef. Std. Err. t P>|t| [95% Conf. Interval]

eps -10.25048 3.968904 -2.58 0.010 -18.06441 -2.43654

navps -3.665952 .3147846 -11.65 0.000 -4.285697 -3.046208
pe .0986674 .022659 4.35 0.000 .0540567 .1432781
_cons 1115.648 45.2071 24.68 0.000 1026.645 1204.651

sigma_u 1340.085
sigma_e 533.37797
rho .863246 (fraction of variance due to u_i)

F test that all u_i=0: F(6, 270) = 129.90 Prob > F = 0.0000

Random Effect Model

R-sq: within = 0.4436 Obs per group: min = 40

between = 0.8938 avg = 40.0
overall = 0.0080 max = 40

Wald chi2(3) = 96.58

corr(u_i, X) = 0 (assumed) Prob > chi2 = 0.0000

shareprice Coef. Std. Err. z P>|z| [95% Conf. Interval]

eps -3.728618 4.875876 -0.76 0.444 -13.28516 5.827923

navps -2.733432 .3795021 -7.20 0.000 -3.477242 -1.989622
pe .1164894 .0280832 4.15 0.000 .0614474 .1715314
_cons 1002.128 122.1796 8.20 0.000 762.66 1241.595

sigma_u 231.04311
sigma_e 533.37797
rho .15799108 (fraction of variance due to u_i)

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Technical Factors
Pooled OLS

. regress shareprices gdp cpi interestspread

Source SS df MS Number of obs = 140

F( 3, 136) = 0.49
Model 2605225.48 3 868408.494 Prob > F = 0.6911
Residual 241922625 136 1778842.83 R-squared = 0.0107
Adj R-squared = -0.0112
Total 244527851 139 1759193.17 Root MSE = 1333.7

shareprices Coef. Std. Err. t P>|t| [95% Conf. Interval]

gdp -216.3344 385.1945 -0.56 0.575 -978.08 545.4112

cpi -119.4444 115.6805 -1.03 0.304 -348.2096 109.3209
interestsp~d 213.6774 493.2534 0.43 0.666 -761.7613 1189.116
_cons 1175.667 2889.975 0.41 0.685 -4539.433 6890.768

Fixed Effect Model

Fixed-effects (within) regression Number of obs = 140

Group variable: companycode Number of groups = 7

R-sq: within = 0.0632 Obs per group: min = 20

between = . avg = 20.0
overall = 0.0107 max = 20

F(3,130) = 2.92
corr(u_i, Xb) = -0.0000 Prob > F = 0.0365

shareprices Coef. Std. Err. t P>|t| [95% Conf. Interval]

gdp -216.3344 157.4404 -1.37 0.172 -527.8114 95.14257

cpi -119.4444 47.28205 -2.53 0.013 -212.9862 -25.90247
interestsp~d 213.6774 201.6072 1.06 0.291 -185.1784 612.5332
_cons 1175.667 1181.218 1.00 0.321 -1161.231 3512.566

sigma_u 1301.5699
sigma_e 545.13591
rho .85076105 (fraction of variance due to u_i)

F test that all u_i=0: F(6, 130) = 114.01 Prob > F = 0.0000

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Random Effect Model

R-sq: within = 0.0000 Obs per group: min = 20

between = 0.0000 avg = 20.0
overall = 0.0107 max = 20

Wald chi2(3) = 8.77

corr(u_i, X) = 0 (assumed) Prob > chi2 = 0.0326

shareprices Coef. Std. Err. z P>|z| [95% Conf. Interval]

gdp -216.3344 157.4404 -1.37 0.169 -524.9119 92.24309

cpi -119.4444 47.28205 -2.53 0.012 -212.1155 -26.77324
interestsp~d 213.6774 201.6072 1.06 0.289 -181.4655 608.8203
_cons 1175.667 1278.736 0.92 0.358 -1330.609 3681.944

sigma_u 1295.8494
sigma_e 545.13591
rho .84963907 (fraction of variance due to u_i)

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