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Portfolio similarity and asset liquidation in the insurance industry

Giulio Girardi, Kathleen W. Hanley, Stanislava (Stas) Nikolova, Loriana Pelizzon () and Mila Getmansky Sherman

Journal of Financial Economics, 2021, vol. 142, issue 1, 69-96

Abstract: We examine whether the concern about insurers selling similar assets due to an overlap in holdings is justified. We measure this overlap using cosine similarity and find that insurers with more similar portfolios have larger subsequent common sales. When faced with a shock to assets or liabilities, exposed insurers with greater portfolio similarity have larger common sales that impact prices. Our portfolio similarity measure can be used by regulators to predict the common selling of any institution that reports security or asset class holdings, making the measure a useful ex ante predictor of divestment behavior in times of market stress.

Keywords: Interconnectedness; Asset liquidation; Similarity; Financial stability; Insurance companies; Fire sales (search for similar items in EconPapers)
JEL-codes: G11 G18 G22 (search for similar items in EconPapers)
Date: 2021
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Related works:
Working Paper: Portfolio Similarity and Asset Liquidation in the Insurance Industry (2020) Downloads
Working Paper: Portfolio similarity and asset liquidation in the insurance industry (2018) Downloads
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DOI: 10.1016/j.jfineco.2021.05.050

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