EconPapers    
Economics at your fingertips  
 

Asset Pricing of Financial Insitutions: The Cross-Section of Expected Stock Returns in the Property/Liability Insurance Industry

Semir Ben Ammar (), Martin Eling () and Andreas Milidonis ()

No 1516, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: Insurance companies are important financial institutions exposed to natural and man-made disasters. We conduct a comprehensive examination of existing asset pricing models in the US insurance universe (1988-2013) and propose an insurance-specific asset pricing model. We find that extant asset pricing models fail to explain the cross-section of insurance stock returns. Instead, we provide evidence that the factors of the insurance-specific model (book-to-market ratio, short-term reversal, illiquidity, and cashflow volatility) are priced in the cross-section of property/liability insurance stocks. Our model takes into account both insurance-specific anomalies primarily related to the insurance business cycle and externalities imposed by catastrophe risk.

Keywords: Asset Pricing; Insurance Stocks; Multifactor Models; Anomalies; Cross-Section; Risk Factors (search for similar items in EconPapers)
JEL-codes: G12 G22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ger and nep-ias
Date: 2015-07
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1516.pdf (application/pdf)

Related works:
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:usg:sfwpfi:2015:16

Access Statistics for this paper

More papers in Working Papers on Finance from University of St. Gallen, School of Finance Contact information at EDIRC.
Bibliographic data for series maintained by Geraldine Frei ().

 
Page updated 2019-04-16
Handle: RePEc:usg:sfwpfi:2015:16