Do Life Insurance Stocks Provide Superior Returns?
14 Pages Posted: 25 Apr 2007
Date Written: December 2005
Abstract
This paper examines the risk/return relationship for life insurance stock returns using CAPM-GARCH. Prior studies use the traditional CAPM and fail to find risk-adjusted returns. Utilizing CAPM-GARCH, we find life insurance stocks provided 7.96% risk adjusted returns for the period 1985-2003. For the sub periods 1991-1996 and 1997-2003, we find that life insurance stocks produced abnormal returns of 14.61% and 12.85% respectively. Based on these findings, we feel that financial analysts should recommend life insurance stocks for any well-diversified portfolio.
Keywords: Life Insurance Returns, GARCH, CAPM
JEL Classification: G22
Suggested Citation: Suggested Citation
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