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http://ssrn.com/abstract=912068
 
 

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Market Risk, Interest Rate Risk, and Interdependencies in Insurer Stock Returns: A System-GARCH Model


James M. Carson


University of Georgia

Elyas Elyasiani


Temple University - Department of Finance

Iqbal Mansur


Widener University - School of Business Administration

January 5, 2008

Journal of Risk and Insurance, Vol. 75, No. 4, pp. 873-891, December 2008

Abstract:     
We examine market, 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 & health (A&H) insurers, followed by life (Life) and property & 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 and weakest between Life insurers and insurers from the other segments. The implication is that greatest diversification benefits arise between Life and the other segments of the insurance industry. Market and interest rate risk for diversified firms are smaller than for non-diversified firms for both product and geographic diversification.

Number of Pages in PDF File: 25

Keywords: Insurance, Stock Returns, Interest Rates, Diversification, System-GARCH

JEL Classification: G22, G34, K23, L11

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Date posted: June 29, 2006 ; Last revised: April 20, 2014

Suggested Citation

Carson, James M. and Elyasiani, Elyas and Mansur, Iqbal, Market Risk, Interest Rate Risk, and Interdependencies in Insurer Stock Returns: A System-GARCH Model (January 5, 2008). Journal of Risk and Insurance, Vol. 75, No. 4, pp. 873-891, December 2008. Available at SSRN: http://ssrn.com/abstract=912068 or http://dx.doi.org/10.2139/ssrn.912068

Contact Information

James M. Carson (Contact Author)
University of Georgia ( email )
Department of Economics
Athens, GA 30602-6254
United States
Elyas Elyasiani
Temple University - Department of Finance ( email )
Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-5881 (Phone)
215-204-5698 (Fax)

Iqbal Mansur
Widener University - School of Business Administration ( email )
3800 Vartan Way
PO Box 69381
Harrisburg, PA 17106-9381
United States
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