An Empirical Study On Pricing Of Index Grading Fund's Class A Share

Grading Fund as an innovative financial product,born in 2007,and reached a record peak in June 2015.However,since the beginning,Grading Fund is not easily understood by the average investor.Its registration in August 2015 was suspended by regulators.In this context,influencing factors of Grading Fund has a very important practical significance.This paper firstly reviews previous studies about the pricing mechanism and arbitrage mechanism of Grading Funds.Then the paper analyzes grading funds from the definition,classification,leverage,conversion mechanism,paired conversion mechanism and the reference NAV calculation rules.The study then focuses on index funds,which are the main type of Grading Funds,and discusses how these factors——the implied rate of return,the underlying index,and the price of Class B shares impact the fund's Class A shares.The study then selects 56 grade funds as samples and construct an empirical model making the Class A shares' discount premiums as explained variable,and the net value,closing price,yield,volume,and the corresponding Class B shares' discount premium as the explanatory variables.The empirical study shows that the implied yield results,track the underlying index increase a positive correlation with the class B share of the premium rate,a-class share volume positively correlated,consistent with the basic theoretical research conclusions.In this case,the paper proposes some recommendations trying to provide new ideas to improve development of China's Grading Funds.