Financial literacy: how it impacts capital market and stock returns in Bangladesh

Abstract

In this report, I have given all the basic internship details including information about the student, my supervisor, and the job responsibilities that I had to perform during the 3 months at CSR Axis Ltd. agency. After that, I start my open topic report on "Financial Literacy: How it impacts Capital Market and Stock Returns in Bangladesh". The first chapter is the introduction where I discussed what financial literacy is and its necessity in our lives. The second chapter contains research on how many and the level of financially literate people are. The third chapter contains the methodology, the methods used for research, and the limitation of the study. In the fourth chapter, I have talked about investment behaviour and showed it in an Ethnographic Decision Tree Model, the effect of the Covid- 19 pandemic on the capital market and the stock market. Lastly, the fifth chapter contains the recommendations and conclusion. Financial literacy has become a crucial necessity for every individual in every country, for effective investment, budgeting, and saving choices, it is a basic requirement for everyone to avoid financial problems. People are becoming more interested in investing in the capital market and stock market, however, most of these people are financially illiterate. As the world is becoming more globalized people are increasing international trade, though Bangladesh's stock market is still not integrated with the global market it will be in the future so investing without proper financial knowledge will bring undesirable outcomes. The investors of Bangladesh make impulsive investment decisions on rumours, news, suggestions, and asymmetric information, they first need to properly investigate the market and understand the trends to make accurate predictions and then finalize their investment decisions. According to studies, lack of proper regulatory framework and monitoring, and lack of investor knowledge and rationality are the leading causes of the inefficiencies of the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE). I have included statistics and graphical representations in this report to present the data collected for this research. To truly understand the situation in Bangladesh I have compared data of other countries on financial literacy and how they are impacted as well. This research report aims to spread awareness about financial literacy and how it impacts the capital market and the stock market in Bangladesh so that the government, education board and people will know the importance of education on finance.