Did federal funds target rate changes affect the market value of insurance compagnies?
AbstractIn this paper, we study the sensitivity of insurance companies’ stock returns with respect to expected and unexpected changes in the Federal funds target rate over the period 1988-2007. We confirm Bernanke and Kuttner (2005) that, as stocks in general, insurance stock returns are only sensitive to the unexpected changes in the Federal funds target rate, but not to the expected ones. However, market-adjusted stock returns do only show a reaction for the non-life insurers. For life insurers, there does not seem to be an industry specific effect on their market value. This can be explained by the business models life and nonlife insurers adopt.
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Bibliographic InfoPaper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2012027.
Length: 24 pages
Date of creation: Dec 2012
Date of revision:
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Web page: https://www.uantwerp.be/en/faculties/applied-economic-sciences/
More information through EDIRC
Interest rate shocks; Insurance companies; Federal funds target rate changes;
Find related papers by JEL classification:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-07 (All new papers)
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