Implications of Modern Portfolio Theory for Life Assurance Companies

  • A. J. Frost
  • I. J. S. Henderson
Chapter

Abstract

The prime purpose of this paper is to assess the relevance of Modern Portfolio Theory (MPT) to life assurance companies. The literature on the topic is now quite copious. Actuarial literature on the topic in the UK is confined to a small number of important papers. Moore’s (1972) paper laid the ground work for discussion of the principle by the actuarial profession. Holbrook’s (1977) paper discussed the relevance of risk and return to Pension Fund performance by summarising the work of Treynor, Sharpe and Fama. The paper by Pountain and Fitzgerald (1980) earlier this year would appear to be the most recent actuarial contribution to the debate.

Keywords

Financial Institution Pension Fund Fund Manager Total Return Investment Management 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
This is a preview of subscription content, log in to check access.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Dodds (1979), The Investment Behaviour of British Life Insurance Companies, Croom Helm.Google Scholar
  2. Fama, E.F. (1970), ‘Efficient capital markets: a review of theory and empirical work’, Journal of Finance.Google Scholar
  3. Holbrook, J.P. (1977), ‘Investment Performance of Pension Funds’, J.I.A., 105, 15.Google Scholar
  4. Jensen, M. (Editor) (1972), Studies in the Theory of Capital Markets, Praeger.Google Scholar
  5. Kingston, T.D. (1974), ‘Measuring Investment Performance’, T.F.A. 34, 241.Google Scholar
  6. Lintner, J. (1965), ‘Security prices, risk and maximal gains from diversification’ Journal of Finance, vol. 20, pp. 347–400.Google Scholar
  7. Mossin, J. (1966), ‘Equilibrium in a capital asset pricing market’, Econometrica, vol. 34, pp.768–83.CrossRefGoogle Scholar
  8. Moore, P.G. (1972), ‘Mathematical models in portfolio selection’. J.I.A., 98, 103.Google Scholar
  9. Pountain, C.C. and Fitzgerald, A.N. (1980), ‘The Evaluation of Investment Risk and Return’. (Presented to the Faculty of Actuaries Students’ Society.)Google Scholar
  10. Praetz, P.D (1973), ‘Random Walks & Investment Theory’, J.S.S., 20, 202.Google Scholar
  11. Report of Committee to Review the Functioning of Financial Institutions (1980), (Wilson), Cmnd 7937.Google Scholar
  12. Roll, R. (1977), ‘A Critique of the Asset Pricing Theory’s Tests’, Journal of Financial Economics, 4, 129.CrossRefGoogle Scholar

Copyright information

© Desmond Corner and David G. Mayes 1983

Authors and Affiliations

  • A. J. Frost
  • I. J. S. Henderson

There are no affiliations available

Personalised recommendations