1.

1 Impact of Dividend Declaration:

Studies found a positive relationship between the historical dividend yield and the long term
stock market returns. But it has a limited success in the short term. When dividend yield on a
stock is high, investors expect high return on the stock. When it is low, investors expect low risk
premium and low rate of return. Yield results indicate that investors can predict future abnormal
returns using public information that show evidence against efficient market hypothesis.

Semi strong form efficient market hypothesis assumes that investors expectations made on new
public information should not lead to above average risk adjusted profits from transactions. So,
public information like dividend declaration should not lead to above average stock returns.

Hypothesis:

The hypotheses to test the Dividend yield in the banking industry are:

H0: It is not possible for investors to gain abnormal return based on dividend yield information

H1: It is not possible for investors to gain abnormal return based on dividend yield information

Price movements of AB Bank:

The above graph shows that the stock return has started to decrease 30 days before the actual
dividend declaration news was available in the market. Then the price settled down to BDT 15.4
on the day of declaration then gradually started to increase in next 10 days due to the after effect
of the dividend declaration. After 10 days, the price increased continuously for 20 more days,
reaching at BDT 19.766.
In 2016, the stock return started to decrease gradually 30 days before the actual dividend
declaration news was available in the market. Then the price settled down to BDT 13.24 on the
day of declaration then gradually started to increase in next 10 days due to the after effect of the
dividend declaration. After 10 days, the price increased continuously for 20 more days, reaching
at BDT 15.88.

Price movements of Bank Asia:

In 2016, the stock return started to decrease very slowly 30 days before and upto 20 days prior
the actual dividend declaration news was available in the market. The price settled at BDT
15.808 and started to increase within the 10 days prior to dividend declaration. It settled down to
BDT 16.38 on the day of declaration and remained almost same for the next 10 days due to the
after effect of the dividend declaration. After 10 days, the price decreased continuously for 20
more days, reaching at BDT 14.635.

Price movements of Dutch Bangla Bank:

The graphical representation shows that the stock return started to decrease very slowly 30 days
before and upto 20 days prior the actual dividend declaration news was available in the market.
The price settled at BDT 101.89 and started to increase within the 10 days prior to dividend
declaration. It settled down to BDT 105.6 on the day of declaration and then decreased
drastically within the next 10 days of the dividend declaration. After 10 days, the price increased
continuously for 20 more days, reaching at BDT 98.955.