| Nowadays, financial market has been developed very fast, while it also encountered great fluctuation which it has never met before. China Financial Market is in its early stage of development, will definitely face an acute fluctuation, especially stock market, since it's newly and fast-developed, therefore, it's quite immature, as a result, it's risky to invest in such a market.Insurance funds flow into stock market will be benefit for both insurance company and stock market, since insurance companies need to do investment while stock market needs more funds, it widened channels'of investment for insurance companies, who will in turn stabilize its operation and then become more competitive in its market. While for stock market, insurance fund is a stable fund provider. Since it's risky to invest in the stock market, therefore, risk management will be vital here. Firstly, to estimate how risky it is, and how much return can be obtained from here. The objective of an investor to do investment is get return, generally speaking, high risk high return, while low risk low return, since stock market is a high risk market, is the return will be also high here? These are the issues that will be discussed in this paper.The main contents are:Definition, Theorem and advantage of Copula Function, Copula Function can capture the correlation between nonlinear dependence, Asymmetric dependence, Copula Model is a nonlinear-based model, it's closer to reality, therefore more effective and useful. Select combination of China Life insurance and investment, and combination of China Ping'an and investment as an example, we tried to obtain the correlation between insurance stock and investment stock by using Copula-GARCH-t (1, 1) model to estimate the Marginal Distribution and correlation coefficient. The Marginal Distribution estimates is the same as Parameters estimates in GARCH (1, 1) Model, then according to standard t distribution to derive Degree of Freedom, from the Degree of Freedom, it appears heavy tails in combined investment stock of China Life Insurance and China Ping'an, the fluctuations in the residual coefficient alpha are positive, and all below 0.05, which means that the fluctuation between China Life Insurance stock and China Ping'an stock and their corresponding combined investment stock appear collection property, i.e. the past fluctuation affects the future either positively or negatively, it shows great fluctuations sometimes, while smaller on the other times. The correlation coefficient indicates that there is strong Asymmetric correlation in the rate of return of the two groups, while it's weak in the middle part, i.e. when there is big increase or decrease in the rate of return of the combined investment, the rate of return of insurance stock will follow the trend; while when the rate of return of the combined investment is stable, the correlation is weak between the rate of return of insurance stock and combined stock. More specific, China Life Insurance and it's investment combined are positive correlation in the right and left tail.But the right correlation is more stronger than the left. These indicated that the China Life Insurance come along with the same increase when investment combined stock portfolio yield increased,and when the yield declined , China Life Insurance also declined too, but the trend has not risen significantly. The China Ping'an, shares and it's investment combined in the results of portfolio analysis of the correlation is the same as China Life Insurance and it's investment combined .The study concluded that the country's insurance industry in the equity investment is good at risk diversification and portfolio strategy. So we can said China insurance companies have been slowly becoming more mature, because they have good ability to control risk and then obtain better benefits. This shows that China Insurance industry have been successful in the new investment channels----------stock market, and Solvency has been strengthened .it is conducive to promote the further development of the insurance industry.VaR model is the most commonly used in financial risk. China Life Insurance and it's investment combined, China Ping'an,and it's investment combined ,they are selected to analysis based on the VaR model. The study found that the calculated value of VaR gains and losses in excess of the number of little value, and the ratio is less than the pre-set level. From the value of the VaR, we can once again certified the abovementioned China's insurance compaies have been gradually becoming more mature in the control risk, so as to have good income.How did the insurance stock's income after its fund entering the market performance. Select the Shanghai Composite index returns ratio has had large fluctuation date in 2007. Take the China Life Insurance stock and China Ping'an stock as the empirical analysis object. According to calculates these two insurance companies to have the large fluctuation same day in the bulk lots and the postpone three day-long income situation. The result demonstrated that two insurance stock prices and the bulk lots trend was the same in the same day, and when drops sharply, the two insurance stock also occur drops sharply, but the second day started to rise, when the trend is risen; the trend is same to drop, but in the future three days will start to recede. There are many reasons for these phenomenon,for example ,interest on the future,reduced the interest tax and so on .These are good news for insurance companies. In additions to, China Life Insurance company and China Ping'an company have been good premiums and good investment yield, these enabled the investor anticipated to favor very much to the insurance stock, and further had curtained stabilizing to insurance company's stock price and pushed rises to affect. |
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