The Features Of Risk And Return Of The SSE Dividend Index

The SSE Dividend Index was released by Shanghai Stock Exchange in 2005,so far,its accumulated retrun has overtaked most other index in China's stock market. In the meantime, products attached to the Dividend Index including Dividend Index ETF and Funds invested in Dividend Index have released continuously all of which have attracted investors' attention. Data shows that whether in mature stock markets or in emerging stock markets, dividend gainings weighs a lot in the total investment return 1922-2002, the annual returen of Dow Jones Industrial Average Index was 11.3%, among which capital appreciation was about 6.9% and dividend gainings was about 4.3% which held 38% of the whole annual return. To September 18.2007, the accumulated return of the SSE Dividend Index was 409.3% compared to 328.37% of the SSE Composite Index. However, higher rate of return may not be achieved if investors irrationally invest in the SSE Dividend Index's constituent or its attached products for its passed high return, because the SSE Dividend Index possesses its own features of return and risk, and the reasons to these features. Investors only find out these features and the preference for return and risk of one's own, more rational investment decision would have made and more possiblely higher rate of return would have achieved.Fitting, regression and data retracing is used in this paper to analyse the features of return and risk of the SSE Dividend Index and the reasons to these features. The results show that, compared to the SSE Composite Index, the SSE Dividend Index would have much more possible to rise more and fall more,and the volability in the short-term is much higher than in the long-term. The selection of contitutent and the drawing rules to the SSE Dividend Index are consided to attributed to these features. More than half contitutent belong to black metal and utilities which have the most influence on the SSE Dividend Index. Besides, the SSE Dividend Index whose weight is adjusted by the rules of the SSE Composite Index magnifies he return and risk.China's stock market has established for a shot time and the marketization was not deep. In 2005, market environment was changed from bear to bull, and the SSE Dividend Index has not go through a whole cycle, so it is not the right time to make a judgement of right and wrong. China's stock market will step further and the market environment would change in one day, based on the results made in this paper, we could ratively conclude that, the SSE Dividend Index fits Long-Term Investors. The longer the investment term, the more possible for higher return.