In Search of Habitat

Xuanjuan Chen, Zhenzhen Sun, Tong Yao and Tong Yu

The Review of Asset Pricing Studies, 2023, vol. 13, issue 2, 266-306

Abstract: We perform portfolio-level analyses to understand insurance firms’ preferred habitat behavior in the government bond market. Based on portfolio durations and portfolio weights across maturities, we find that interest rate risk exposures of insurers’ portfolios are related to their operating liabilities and financing constraints. We show that this habitat behavior significantly affects bond pricing. During the “quantitative easing” era, bond purchases by the Federal Reserve have a larger impact on the yields of Treasury bonds with a higher habitat demand. (JEL E43, E52, G11, G12, G23)Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:oup:rasset:v:13:y:2023:i:2:p:266-306.

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