Portfolio Similarity and Asset Liquidation in the Insurance Industry

52 Pages Posted: 10 Oct 2017 Last revised: 20 Nov 2019

See all articles by Giulio Girardi

Giulio Girardi

Securities and Exchange Commission

Kathleen Weiss Hanley

Lehigh University - College of Business

Stanislava (Stas) Nikolova

University of Nebraska - Lincoln

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration; Goethe University Frankfurt - Research Center SAFE; Ca Foscari University of Venice

Mila Getmansky Sherman

University of Massachusetts at Amherst - Eugene M. Isenberg School of Management - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: October 30, 2019

Abstract

We examine whether the concern of academics and regulators about the potential for insurers to sell similar assets due to the overlap in their holdings is justified. We measure this overlap using cosine similarity and find that insurers with more similar portfolios have larger subsequent common sales. We show that faced with a shock to their assets or liabilities, affected insurers with greater portfolio similarity have larger common sales that impact prices. Our measure can be used by regulators to predict the common selling of any institution that reports security or asset class holdings regardless of their public company status making it a useful ex-ante predictor of divestment behavior in times of market stress.

Keywords: Interconnectedness, asset liquidation, similarity, financial stability, insurance companies, fire sales

JEL Classification: G11, G18, G2

Suggested Citation

Girardi, Giulio and Hanley, Kathleen Weiss and Nikolova, Stanislava (Stas) and Pelizzon, Loriana and Getmansky Sherman, Mila, Portfolio Similarity and Asset Liquidation in the Insurance Industry (October 30, 2019). Available at SSRN: https://ssrn.com/abstract=3050561 or http://dx.doi.org/10.2139/ssrn.3050561

Giulio Girardi

Securities and Exchange Commission ( email )

Washington, DC
United States

Kathleen Weiss Hanley

Lehigh University - College of Business ( email )

Bethlehem, PA 18015
United States

Stanislava (Stas) Nikolova (Contact Author)

University of Nebraska - Lincoln ( email )

Lincoln, NE 68588-0490
United States
402-472-6049 (Phone)

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, D-60323
Germany

Goethe University Frankfurt - Research Center SAFE ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

HOME PAGE: http://www.safe-frankfurt.de

Ca Foscari University of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy

Mila Getmansky Sherman

University of Massachusetts at Amherst - Eugene M. Isenberg School of Management - Department of Finance ( email )

Amherst, MA 01003-4910
United States

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