Study Of The Investment Value Of China's Securities Analyst Stock Ratings

After about twenty years' development of China's stock market, institutional investors have already established themselves as dominant players of the market. At the same time it is also a golden age for the booming of security analysts, who mainly serve the institutional investors by preaching their investment advice. We have no doubt that they have dug deep in the market through studying the macroeconomics, the industries and the public corporations. Acting as the crucial information makers and bearers of the market, they have played a vital role in the market.Through their research, securities analysts give investment ratings to listed companies, such as "Buy", "Outperform", "neutral" or "underperform". Therefore we wonder if investors can achieve absolute return or excess earnings, when they conduct stock operation according to the investment advice of securities analysts. What role do these securities analyst play in the stock market, digging into the long-term investment value of companies, capturing short-term hotspot of the market, or just misleading investors? The answer to this question directly relates to the benefits of investors as well as the value of securities analysts. This thesis adopts event study, and conducts research based on datum provided by "Wind".To begin with, this thesis describes theoretical basis of investment rating given by securities analysts, the history, status quo and development trend of securities analysts industry. Then this thesis makes a deep and systematic research on the adjustment among different investment ratings given by securities analysts, with sample datum of "investment ratings in 2007 and 2008" from "Wind", on the background of the "bull market" and the "bear market", and empirically tests investment reference value of stock rating.Our research shows that "holding unchanged rating" takes up the majority of all the ratings, while upgrading, downgrading and new ratings holds a close percentage. Analysts are prone to deliver a relatively more optimistic rating, and the stocks they recommend can provide excess earnings, but the excess earning rate will lower by 40%-60% than expected. In conclusion, stock rating has some investment reference value to a certain extent, and on a large scale it is quite probable to gain excess earnings depending on the investment advice of securities analysts. This thesis also shows that under the different market atmosphere of "bull" and "bear" market, analysts have almost coherent ability in judgment, but "holding unchanged rating" requires a different interpretation between the two markets. Finally this thesis forwards suggestion on how to protect investors and maintain a healthy development of securities analysts industry from the perspective of investors and supervisors.