Did Federal Funds Target Rate Changes Affect the Market Value of Insurance Companies?

22 Pages Posted: 23 Nov 2012

See all articles by Marc J. K. de Ceuster

Marc J. K. de Ceuster

University of Antwerp - Faculty of Applied Economics - City Campus

Jie Li

University of Antwerp - Antwerp Management School; University of Antwerp

Hairui Zhang

Universiteit Antwerpen; University of Antwerp - Antwerp Management School; Facultés Universitaires Saint Louis à Bruxelles

Date Written: November 22, 2012

Abstract

In this paper, we study the sensitivity of insurance companies’ stock returns with respect to expected and unexpected changes in the Federal funds target rate over the period 1988-2007. We confirm Bernanke and Kuttner (2005) that, as stocks in general, insurance stock returns are only sensitive to the unexpected changes in the Federal funds target rate, but not to the expected ones. However, market-adjusted stock returns do only show a reaction for the non-life insurers. For life insurers, there does not seem to be an industry specific effect on their market value. This can be explained by the business models life and non-life insurers adopt.

Keywords: Interest rate shocks, Insurance companies, Federal funds target rate changes

JEL Classification: E42, E43, E52, G22

Suggested Citation

de Ceuster, Marc J. K. and Li, Jie and Zhang, Hairui, Did Federal Funds Target Rate Changes Affect the Market Value of Insurance Companies? (November 22, 2012). Available at SSRN: https://ssrn.com/abstract=2179438 or http://dx.doi.org/10.2139/ssrn.2179438

Marc J. K. De Ceuster

University of Antwerp - Faculty of Applied Economics - City Campus ( email )

Office B-337
Prinsstraat 13
Antwerp, Antwerp 2000
Belgium
+ 32 3 220 41 24 (Phone)
+ 32 3 220 40 64 (Fax)

HOME PAGE: http://www.ua.ac.be/marc.deceuster

Jie Li

University of Antwerp - Antwerp Management School ( email )

Boogkeers 5
Antwerp, 2000
Belgium

University of Antwerp ( email )

Prinsstraat 13
Antwerp, Antwerp 2000
Belgium

Hairui Zhang (Contact Author)

Universiteit Antwerpen ( email )

Prinsstraat 13
Antwerp, 2000
Belgium

HOME PAGE: http://https://www.uantwerpen.be/en/staff/hairui-zhang/

University of Antwerp - Antwerp Management School ( email )

Boogkeers 5
Antwerp, 2000
Belgium

HOME PAGE: http://www.antwerpmanagementschool.be/en/faculty-research/faculty/zhang-hairui-e

Facultés Universitaires Saint Louis à Bruxelles ( email )

Boulevard du Jardin Botanique 43
Bruxelles, 1000
Belgium

HOME PAGE: http://www.usaintlouis.be/sl/4026048.html

Register to save articles to
your library

Register

Paper statistics

Downloads
28
Abstract Views
363
PlumX Metrics