Predicting Insurance Investment: A Factor Analytic Approach
Samuel Obi-Nnamdi Agwuegbo, Adetunji Philip Adewole and A. N. Maduegbuna
DOI : 10.3844/jmssp.2010.321.324
Journal of Mathematics and Statistics
Volume 6, Issue 3
Problem statement: In the last decade growing attention has been paid to the pattern of investments by the insurance industry and the question of how to evaluate such investments. In an economy where the capital market is huge and active, mathematical considerations come into play in the selection of investments to ensure yield maximisation. Approach: This study examined the use of factor analysis as an emerging technique for the analysis of insurance investment in Nigeria. Results: The proposed technique described a number of methods designed to analyze interrelationships within the investment variables in terms of few underlying but unobservable random quantities called factors. The factors were constructed in a way that reduces the overall complexity of the data by taking advantage of inherent interdependencies. Conclusion: The result obtained through this approach were promising and shows that two principal components of the factor loadings have a cumulative proportion of variance accounted for 94.5% of the total variations of the investments pattern.
© 2010 Samuel Obi-Nnamdi Agwuegbo, Adetunji Philip Adewole and A. N. Maduegbuna. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.