Post by Sapphire Capital on Nov 27, 2008 22:54:37 GMT 4
Market Risk, Interest Rate Risk, and Interdependencies in Insurer Stock Returns: A System-Garch Model
James M. Carson
Elyas Elyasiani
Temple University - Department of Finance
Iqbal Mansur
Widener University - School of Business Administration
Journal of Risk & Insurance, Vol. 75, Issue 4, pp. 873-891, December 2008
Abstract:
We examine market risk, interest rate risk, and interdependencies in returns and return volatilities across three insurer segments within a System-GARCH framework. Three main results are obtained: market risk is greatest for accident and health (A&H) insurers, followed by life (Life) and property and casualty (P&C) insurers; interest rate sensitivity is negative and greatest for Life insurers; and interdependencies in returns are significant with the magnitude being strongest between P&C and A&H insurers. The implication is that greatest diversification benefits arise between Life and the other segments of the insurance industry. Market risk and interest rate risk for diversified firms are smaller than those for nondiversified firms for both product and geographic diversification.
papers.ssrn.com/sol3/papers.cfm?abstract_id=1296889
James M. Carson
Elyas Elyasiani
Temple University - Department of Finance
Iqbal Mansur
Widener University - School of Business Administration
Journal of Risk & Insurance, Vol. 75, Issue 4, pp. 873-891, December 2008
Abstract:
We examine market risk, interest rate risk, and interdependencies in returns and return volatilities across three insurer segments within a System-GARCH framework. Three main results are obtained: market risk is greatest for accident and health (A&H) insurers, followed by life (Life) and property and casualty (P&C) insurers; interest rate sensitivity is negative and greatest for Life insurers; and interdependencies in returns are significant with the magnitude being strongest between P&C and A&H insurers. The implication is that greatest diversification benefits arise between Life and the other segments of the insurance industry. Market risk and interest rate risk for diversified firms are smaller than those for nondiversified firms for both product and geographic diversification.
papers.ssrn.com/sol3/papers.cfm?abstract_id=1296889