Common Stock Price Behavioro of Commercial Banks in Nepal
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Central Department of Management
Abstract
Common stock price behavior highly depends upon financial indicators like EPS and
DPS. Banks EPS and DPS are positively and negatively correlated with MVPS.
Generally the EPS and DPS are positively correlated with MVPS however sometime
the negative correlation is observed this is due to the technical factors like demand and
supply rumors in stock market. This descriptive- comparative study was conducted on
six banks on the basic of establishment date before 2000. Data were collected from the
website of concerned banks. Data are analyzed using the different financial tools and
statistical tools. The calculations are presented on back side on the topic appendix. On
average the Nabil bank has high EPS i.e. the earning of Nabil has high than compare to
others. The investors look to invest in consistence P/E Ratio banks. having less C.V. is
considered as consistence in Ratio .so in this criteria NIBL is good .the Nepal bank
doesn’t declares the dividend in previous FY that means two things one is Bank is fail
to earn profit another is the earning are invested rather than giving dividend. The
MVPS/BVPS Ratio is greater than 1 i.e. the banks stocks are overvalued. The findings
indicated that there are technical factors rather than fundamental factors that affect the
common stock price. The EPS seems more influence market price of stocks. The
correlation between the DPS and MVPS shows the highest positive i.e. 0.89 of Kumari
Bank. And highest negative is -0.64 of NIBL Bank here the fundamental factors doesn’t
works. Random walk efficient market theory is seems to be implied.
Key words: common stock, fundamental factors, technical factors, Random walk
efficient market.