Self-Fulfilling Runs: Evidence from the US Life Insurance Industry

Nathan Foley-Fisher, Borghan Narajabad and Stephane Verani

Journal of Political Economy, 2020, vol. 128, issue 9, 3520 - 3569

Abstract: The interaction of worsening fundamentals and strategic complementarities among investors renders identification of self-fulfilling runs challenging. We propose a dynamic model to show how exogenous variation in firms’ liability structures can be exploited to obtain variation in the strength of strategic complementarities. Applying this identification strategy to puttable securities offered by US life insurers, we find that at least 40% of the $18 billion run on life insurers by institutional investors during the 2007–8 crisis was amplified by self-fulfilling expectations. Our findings suggest that other contemporaneous runs in shadow banking by institutional investors may have had a self-fulfilling component.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://dx.doi.org/10.1086/708817 (application/pdf)
http://dx.doi.org/10.1086/708817 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Self-fulfilling Runs: Evidence from the U.S. Life Insurance Industry (2016)
Working Paper: Self-fulfilling Runs: Evidence from the U.S. Life Insurance Industry (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:doi:10.1086/708817

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().