Evaluation of stock market technical efficiency with a comparison of groups of companies in Dhaka stock exchange


Hasan M. Z., KAMIL A. A., Baten M. A.

International Journal of Physical Sciences, vol.6, no.24, pp.5857-5865, 2011 (Scopus) identifier

  • Publication Type: Article / Article
  • Volume: 6 Issue: 24
  • Publication Date: 2011
  • Journal Name: International Journal of Physical Sciences
  • Journal Indexes: Scopus
  • Page Numbers: pp.5857-5865
  • Keywords: Dhaka stock exchange, Inefficiency effects, Stochastic frontier model, Technical efficiency
  • Istanbul Gelisim University Affiliated: No

Abstract

The objective of this study was to measure stock market efficiency of the groups of companies, such as Group-A (financial), Group-A (non-financial), Group-B and Group-Z of Dhaka stock exchange (DSE) market in Bangladesh applying the Stochastic Frontier approach, incorporating technical inefficiency effect model. Among the four groups, most efficient group was Group-A (financial) and most inefficient group was Group-Z. This study showed that the mean technical efficiency of the companies of DSE market during the period 2000 to 2008 was 0.8782. This implied that 87% of potential output was being realized by the companies of DSE market. In case of using production function model; it was found that the Translog production function was more preferable than the Cobb-Douglas production function. The technical efficiency rate was found gradually increasing over time in the stock market in Bangladesh. © 2011 Academic Journals.