An Examination of Insurance Stock Prices Following the 1989 Loma Prieta Earthquake
AbstractThis paper examines the reaction of insurance stock prices to the 1 989 Loma Prieta earthquake. Three theories about the perceived future operating performance of insurance companies following the earthquake are tested: (1) substantial cash outflows due to the claims, (2) abandonment of soft-market pricing, and (3) additional net cash inflows as a result of increased earthquake insurance premiums. The analysis employs a two-index market model to control for industry clustering. The findings indicate that market perceived that the effect of the earthquake would be additional earnings for earthquake insurers.
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Bibliographic InfoArticle provided by Western Risk and Insurance Association in its journal Journal of Insurance Issues.
Volume (Year): 16 (1993)
Issue (Month): 1 ()
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