Optimality Analysis On Chinese Insurance Fund Investment Strategy Based On Black

Currently, Chinese insurance industry is increasingly competitive. Because of moral hazard and adverse selection and other reasons, insurance companies have low profit margins. Profit of insurance companies relies mainly on investment business. However, As the proportion of China’s insurance industry investment is unreasonable, China’s insurance investment income is not high, this phenomenon negatively affects the healthy development of the industry in China. Therefore, important issues to be solved are optimization of China’s insurance funds investment strategy and improving the investment margins. The article argues that currently the main problem is related to the method of building investment portfolio. It holds the opinion we should take into consideration the irrationality of investors when building up the portfolio. The article makes a demonstration by applying the Black-Litter man model. It shows that the portfolio that has incorporated investor views is more reasonable than the others.This article contains six parts, the first part is introductions including background of the issues and research, and pointing out the significance of studying Chinese insurance investment, as well as briefly describing the research methods and innovations. The second part is the literature review which is divided into two parts, summary of review of Empirical Research on Black-Litterman model and the investment strategies. The third part is the theoretical basis of this article. Comparative analysis on Markowitz portfolio theory, asset-liability management theory and Black-Litterman model. The fourth part analyzes the current situation of China’s insurance investment and problems, and carrying out the status of insurance funds investment in U.S., Japan and Britain. Analyzing the experience of developed countries on the Insurance Investment and implications for China. The fifth part is the empirical analysis of this article. This article used the "two-step" method to research on the dynamic asset allocation for insurance funds. Firstly, by applying the methods of econometrics, it set up the structural equation model to establish the quantitative relationship between macro economy and the yields of various allowable investment vehicles. Secondly, it conducted an empirical analysis on insurance asset allocation according to the Black-Litterman model, trying to compare the results of optimal asset allocation. Part VI is as the conclusion of this article summarizing the theoretical and empirical analysis of five parts, putting forward feasible suggestions for Chinese investment of insurance funds, and discussing the possible direction of future research.The main conclusions are:(1) Further liberalization of investment channels and investment securitization is the trend of China’s insurance industry investment;(2) accompanied by broaden the investment channels of insurance funds, the insurance company’s core competitiveness will depend on future investment risk management;(3) the study found out that the results were quite different in different constraints and different time intervals, but their risk-return features were all superior to the general market portfolios. Accordingly, this article discussed the practicality of the Black-Litterman model in the field of insurance fund investment and put forward feasible suggestions for China’s insurance fund investment practices.