Does mortality improvement increase equity risk premiums? A risk perception perspective

Rachel Huang (), Jerry C.Y. Miao and Larry Y. Tzeng

Journal of Empirical Finance, 2013, vol. 22, issue C, 67-77

Abstract: Using data for G7 countries over the period from 1950 to 2007, this paper finds that an unexpected shock to the mortality rate is significantly negatively correlated with the equity premium. A one basis point unexpected negative shock to the mortality rate increases both the one-year and five-year equity premiums by 0.54% and 1.66%, respectively. We also demonstrate how financial institutions could use our findings to hedge the risk of mortality-linked securities.

Keywords: Mortality risk; Equity risk premium; Demography; Risk perception (search for similar items in EconPapers)
JEL-codes: D03 G12 J10 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:22:y:2013:i:c:p:67-77

DOI: 10.1016/j.jempfin.2013.03.002

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