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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 ()
Additional contact information
Giulio Girardi: Division of Economic and Risk Analysis, U.S. Securities and Exchange Commission, Washington
Kathleen W. Hanley: College of Business and Economics, Lehigh University
Mila Getmansky Sherman: Isenberg School of Management, University of Massachusetts

No 2020:13, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: We examine whether the concern of academics and regulators about the potential for insurers to sellsimilar assets due to the overlap in their holdings is justified. We measure this overlap using cosine similarity and find that insurers with more similar portfolios have larger subsequent common sales. We show that faced with a shock to their assets or liabilities, affected insurers with greater portfolio similarity have larger common sales that impact prices. Our measure can be used by regulators to predict the common selling of any institution that reports security or asset class holdings regardless of their public company status making it 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 G2 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2020
New Economics Papers: this item is included in nep-fmk, nep-ias and nep-rmg
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Related works:
Journal Article: Portfolio similarity and asset liquidation in the insurance industry (2021) Downloads
Working Paper: Portfolio similarity and asset liquidation in the insurance industry (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2020:13

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