Stock Market Crash in Bangladesh: The Moneymaking Psychology of Domestic Investors
American Journal of Theoretical and Applied Business
Volume 3, Issue 3, September 2017, Pages: 43-53
Received: Jul. 9, 2017;
Accepted: Aug. 23, 2017;
Published: Sep. 12, 2017
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Md. Tahidur Rahman, Department of Business Administration, EXIM Bank Agricultural University Bangladesh, Chapainawabganj, Bangladesh
Syed Zabid Hossain, Departments of Accounting and Information Systems, University of Rajshahi, Rajshahi, Bangladesh
Md. Habibullah, Bangladesh Institute of Capital Market, Dhaka, Bangladesh
After the cruel crash in 1996 Bangladesh stock market had started growing from 2006 due to listing of a few profitable government entities and Multinational Companies (MNCs). Together with individual investors nearly all commercial banks involved themselves intensely in stock market. Step by step, the bullish market transformed into a bubble and on December 05, 2010, the Dhaka Stock Exchange General Index (DGEN) reached at the record high of 8918.5, almost 5.6 times higher than December 2006. Concurrently, market capitalization and turnover increased by 11.1 times and 61.7 times respectively. However, when the bubble burst on December 19, 2010 the DGEN witnessed its biggest one day fall of 6.7 percent and since then the market has become bearish with almost no positive movement of stock prices. Against this backdrop, this study identified four moneymaking psychologies of domestic investors specifically greed, envy, speculation, and overconfidence that contributed to the formation of bubble, while four loss-minimizing and capital-protecting psychologies such as panic, frustration, lack of self-confidence, and distrust caused the bubble to burst. The bankers, brokers and manipulators were the biggest gainers, whereas the most unaware and greedy small investors encountered heavy loss. The market will be less volatile, more mature, and sustainable when most of the investors will be conscious about the potential risks and returns and the regulators will play their part sincerely and efficiently.
Md. Tahidur Rahman,
Syed Zabid Hossain,
Stock Market Crash in Bangladesh: The Moneymaking Psychology of Domestic Investors, American Journal of Theoretical and Applied Business.
Vol. 3, No. 3,
2017, pp. 43-53.
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