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The Index Portfolio And Performance Measurement Of Security Investment Fund

Posted on:2006-06-14Degree:MasterType:Thesis
Country:ChinaCandidate:B LiFull Text:PDF
GTID:2166360155454164Subject:Business Administration
Abstract/Summary:PDF Full Text Request
The security investment fund is the inevitable outcome of the securitymarket development, which has hundreds of year's history in developedcountry. It is a collective investing method in which interests and risks areshared together to collect multitudinous fund by selling share to formindependent property for security investment by means of portfolio. As theestablishing of the two stock exchanges in shanghai and Shenzhen, thesecurity market get into a new developing period in our country, meanwhile,the security investment fund comes into being and develop. At the verybeginning of founding it, because of the lack of basis law regulation, thereexist many problems such as diffusion of relationship in law, no law to dependon and weak management. At the same time, guided by the financial need of"for the local"required by the government and restrained by the small scale ofthe home stock market, the security investment fund is not in the basicinvesting way of market stock, but to real estate, enterprises and so on. Thesefunds are in difficulty of that the enterprise investment can't be realized andthat loan capital can't return, so that the development of fund industry is at astandstill. In Nov. 1997, the securities commission of the State Council issued"Security Investment Fund Management Temporary Provisions". From thenon, the development of Chinese fund industry stepped into a new stage. Thefund number increased from 5 in the end of 1998 to 110 in the end of 2003.simultaneously, the net value of investment fund increased quickly from 10.74billion in 1998 to 171.56 billion in 2003. with the constant increase of theinvestment fund, the styles of investment fund are becoming various and indexfund appears.Index fund is a special type of the security investment fund. It constructsthe portfolio according to a certain stock price index. Instead of choosing thestock and business opportunity actively, it aims at gaining the average profit ofthe whole market presented by the target index just by tracking down thechange of it. The theory of index investment is based on the efficient markethypothesis(EMH) and random walk hypothesis. The basic thoughts of theformer is that stock market can efficiently reflect the information of the stockor the whole market so that when some relevant information comes out in themarket, it can be seen quickly from the stock price. Whereas, according to thelatter, comparing the price of later period with that of earlier period, thechange of it must be random and unexpected because of the prompt transmit ofinformation and its influence on price. At present, there are many problems inour stock market, of which the lack of efficiency of market is most serious,which restricts the development of index fund. In spite of that, we began tointroduce the index-based investing method. However, because of theimperfection of the index system in stock market, what the index fund trackedare mostly market comprehensive index, and the total performance of thoseindex funds are not better than or even worse than the performance of targetindex. At the beginning of 2003, the Shenzhen stock market promote theShenzhen stock 100 index, which can efficiently represent Shenzhen stockmarket with high market coverage and powerful representativeness, andprovide trackable target index for index fund. After that, shanghai stock 50index was promoted last January, which functioned the same. As theappearance of these market index, we try to construct portfolio by means ofthe index-based investing method, and to evaluate its achievement reasonably,then to test the feasibility to index-based investing of the two market indexes.There are three main methods to construct index portfolio: completecopying, samples of superiority, layered sampling. Of these three, layeredsampling is a practical and efficient method, which is widely used internallyand externally. The key point to construct index portfolio of such method is toclassify and sample the index in shares reasonably. Firstly, we classify theshares of the market index according to this industry; Secondly, in order tobalance the operability of index portfolio and to track to errors, we adopt theprinciple of choosing 40% objective index shares and ascertain the importanceof each portfolio according to the investing weight of market index; Thirdly, inchoosing the samples of index portfolio, besides using the scale and liquidityreflecting individual stock, we choose the risk factor β, which is an evaluatingindex to reflect stock systematic risk. In single index model, the earning ratioof the individual securities is influenced by the earning ratio of marketportfolio. They have simple linear structure, that is, there is a linear relationbetween the earning ratio r and the market index earning ratio rm : r = α+ βrm+ ε, in which αand βas parameter, εas disturbance. Then we can work out theparameter βin the model by the ordinary least squares estimation. Thisparameter indicate the changing degree of individual stock earning ratioinfluenced by that of market portfolio. Finally, we evaluated and compared theachievement of shanghai stock 50 index portfolio and Shenzhen stock 100index portfolio gained during the data-collecting period. According to theaccounted result, we can find out that the influence to shanghai stock 50 indexcaused by shanghai stock 50 index portfolio is weaker so that the shanghai 50...
Keywords/Search Tags:Performance
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