Volatility of Stock Return in the Dhaka Stock Exchange

This note examines the volatility in stock prices in the Dhaka Stock Exchange (DSE) during 2003- 2007. Excessive volatility and fluctuations in stock price fail to provide the correct signal on company’s real worth although stock prices generate useful information to ensuring efficiency of markets in the real world. Stock price volatility, however, is not an evidence of irrational market behavior or inefficient markets. The absence of price variation may result in a loss of investors’ interest to participate in the market. It is important for the concerned authority to intervene when the market experiences excessive volatility since high volatility can lead to a general erosion of investors’ confidence and flow of capital away from the equity market.