Rate of Return and Risk Analysis of the Insurance Securities Using Arbitrage Pricing Theory Model

The study started with the analysis of the relationship between return on insurance securities and five economic factors, i.e. inflation, money supply, industrial production index, SET index, and saving interest rates. Then the results were applied to estimate risk from economic factors, risk premium from economic factors and the expected return on insurance securities using Arbitrage Pricing Theory (APT) model. The findings from the study can be used to support decisions to invest in insurance securities. In this study, the monthly secondary data were collected during January 2009 to December 2013. The study found that only rate of change of three factors, i.e. SET index, inflation and industrial production index, affect the change of return rate of each insurance securities at significance level of 0.05 and the securities that suggest for investment total of 11 securities, which were underpriced securities.