Reliability Study Of Fund Rating System In China

The normal securities investment fund industry in China has beendeveloping for15years since1998. With the increasing number of fundsand improvement of investment demand, fund rating system has raisedmuch attention. After CSRC’s promulgation of relevant administrativemeasures at end of2009, there are7institutions in all which have fundratings qualifications in China now.As one of the important ways to evaluate funds, fund ratings havedifferent meanings to relevant parties and promote the healthydevelopment of the industry. Both foreign and domestic investors expresstheir recognition and trust to the ratings by practical actions. However, it isa great contrast between the universal use of ratings in fund sales processand the relative shortage of academic research in China. So this thesisintroduces China’s current fund rating system, collects all the ratings from2010to2012since the effectiveness of the new regulation and the funds’ monthly return data, and analyzes the performance differences betweenthe high-star and low-star rating categories. It is the first time to do thesystematic comparison by different times, rating institutions and fundtypes.Results show that according to the defined "rating efficiency", line by50%, only JAJX’s ratings of monetary funds have predictive ability. Inaddition, while the rest ratings are not reliable enough, three-year rating isrelatively better than the five-year.Finally, this thesis explores the possible reasons of the above resultsby the differences in rating methodology and fund types. And it alsodiscusses the way to a perfect fund rating system in the future from theperspective of the public disclosure of information. In the end, readers aretold to understand and use fund ratings properly.