Crisis Sentiment in the U.S. Insurance Sector

Journal of Risk and Insurance, Forthcoming

40 Pages Posted: 11 Dec 2013 Last revised: 23 Feb 2016

See all articles by Felix Irresberger

Felix Irresberger

Durham University

Fee König

Technical University of Dortmund

Gregor N. F. Weiss

University of Leipzig - Faculty of Economics and Management Science

Date Written: February 22, 2016

Abstract

We use internet search volume data to measure idiosyncratic and market-wide crisis sentiment to explain insurer stock return volatility. We find that market-level crisis sentiment was a significant predictor of stock return volatility of U.S. insurers between 2006 and 2010. Higher levels of crisis sentiment are associated with higher levels of price uncertainty. This effect is strongest for insurers with less exposure to the adverse effects of the financial crisis. Further, crisis sentiment also affects the cross-section of movements in insurer stock prices. Our results imply that investors exited insurer stocks mainly due to crisis sentiment rather than a rational assessment of the insurers’ actual exposure to the crisis.

Keywords: Financial crises, insurance, investor sentiment

JEL Classification: G01, G22, D03

Suggested Citation

Irresberger, Felix and König, Fee and Weiss, Gregor N. F., Crisis Sentiment in the U.S. Insurance Sector (February 22, 2016). Journal of Risk and Insurance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2364365 or http://dx.doi.org/10.2139/ssrn.2364365

Felix Irresberger

Durham University ( email )

Old Elvet
Mill Hill Lane
Durham, Durham DH1 3HP
United Kingdom

Fee König

Technical University of Dortmund ( email )

Emil-Figge-Straße 50
Dortmund, 44227
Germany

Gregor N. F. Weiss (Contact Author)

University of Leipzig - Faculty of Economics and Management Science ( email )

Grimmaische Str. 12
Leipzig, 04109
Germany
+49 341 97 33821 (Phone)
+49 341 97 33829 (Fax)

HOME PAGE: http://www.wifa.uni-leipzig.de/nfdl

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