The Research On Comparison Of Our Non-life Insurance Companies' Equity Pricing Model In DFA

Dynamic Financial Analysis (DFA) is a kind of complicated and advanced Asset- Liability Management (ALM) technology used by insurance companies. DFA which uses stochastic simulation technology to simulate the strategies in different conditions can give reference information to the operations of insurance companies. DFA is composed of several modules. The"Investment Generator"is used to simulate the returns of investment. The investment of insurance funds is an essential part of insurance operation, and equities investment is an important component of it. The equities investment simulated by CAPM in traditional DFA. But CAPM is limited in our equity-simulation practices. So DFA with CAPM will be limited, too.Fama-French three-factor model come into being based on CAPM, and it developed to three risk-factors. It is more applicable in China and other countries through empirical analysis. The paper calculates the basic parameters of FF three-factor model base on the data of our stock-market, and compares two models in basic features, elucidative capability to portfolios and applicative capability in DFA. At last I design several investment strategies of non-life insurance company, and simulate them respectively in DFA with FF three-factor model. By analyzing the result, it comes to several suggestions when non-life insurance companies make asset investment strategy.This paper compares and analyzes the two models and chooses the FF three-factor model finally. The parameters I calculated by the data of our capital market in recent years must be useful for the model's application. Using DFA can improve our non-life insurance companies'management, and using FF three-factor model can describe and forecast equity asset's performance at a nicety level. It shapes the basement of making investment strategy of insurance companies.