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Market Efficiency: Evidence from Market Reactions of Insurance Industry Stocks to the September 11, 2001 Event

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  • Yuling Wang
  • Richard B. Corbett

Abstract

The events of September 11, 2001 had profound financial consequences for the insurance industry. Property and liability insurers took significant underwriting losses in many lines as a result of this event. Property and liability insurer stocks might then be expected to have higher negative abnormal returns than the stocks of life and health insurers. Using traditional event study methodology with a longer event window, we find that property and liability insurer stocks did generate much larger abnormal returns than those of life and health insurers. We also find that, after the first week of trading subsequent to the market's reopening on September 17, the abnormal returns were not significant from zero, which is consistent •with the efficient market hypothesis. Insurance industry Stocks recovered quickly after the events of September 11 and sometimes even outperformed the market. Investors were rational and responded to the expectation of increases in insurance demand and strength in capacity constraints.

Suggested Citation

  • Yuling Wang & Richard B. Corbett, 2008. "Market Efficiency: Evidence from Market Reactions of Insurance Industry Stocks to the September 11, 2001 Event," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 31(2), pages 152-167.
    • Handle: RePEc:wri:journl:v:31:y:2008:i:2:p:152-167
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    Cited by:

    1. Paul J. J. Welfens, 2020. "Macroeconomic and health care aspects of the coronavirus epidemic: EU, US and global perspectives," International Economics and Economic Policy, Springer, vol. 17(2), pages 295-362, May.

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