An Investigation of the Short‐Run and Long‐Run Stock Returns Surrounding Insurer Rating Changes

33 Pages Posted: 20 Feb 2018

See all articles by Leon Chen

Leon Chen

Minnesota State University, Mankato

Jennifer J. Gaver

University of Georgia - J. M. Tull School of Accounting, Terry College of Business

Steven W. Pottier

University of Georgia - Department of Insurance, Legal Studies, Real Estate

Date Written: March 2018

Abstract

We find that stock returns move in the direction of insurer rating changes in the 12‐month period prior to the announcement. There is an additional stock price response following the announcement of a downgrade, but no response to upgrade announcements. The reaction to a downgrade is more pronounced when it involves a smaller insurer, when it spans multiple levels, or when it is a threshold downgrade. Returns are significantly more negative during the 12 months leading up to a downgrade announcement during the financial crisis (2008 and 2009) compared to other sample years.

Suggested Citation

Chen, Leon and Gaver, Jennifer J. and Pottier, Steven W., An Investigation of the Short‐Run and Long‐Run Stock Returns Surrounding Insurer Rating Changes (March 2018). Journal of Risk and Insurance, Vol. 85, Issue 1, pp. 35-67, 2018. Available at SSRN: https://ssrn.com/abstract=3124652 or http://dx.doi.org/10.1111/jori.12138

Leon Chen (Contact Author)

Minnesota State University, Mankato ( email )

150 Morris Hall
Mankato, MN Minnesota 56001
United States

Jennifer J. Gaver

University of Georgia - J. M. Tull School of Accounting, Terry College of Business ( email )

233 Brooks Hall
Athens, GA 30602-6252
United States
706-542-3699 (Phone)
706-542-3630 (Fax)

Steven W. Pottier

University of Georgia - Department of Insurance, Legal Studies, Real Estate ( email )

Athens, GA 30602-6254
United States
706-542-3786 (Phone)
706-542-4295 (Fax)

HOME PAGE: http://www.terry.uga.edu/insurance/pottier.html

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