IDEAS home Printed from https://ideas.repec.org/a/bpj/apjrin/v13y2019i2p16n4.html
   My bibliography  Save this article

Ordinary and Markov-Switching Autoregressive Models for Firm-Level Underwriting Data

Author

Listed:
  • Feng Frank Y.

    (School of Finance and Shanghai Institute of International Finance and Economics, Shanghai University of Finance and Economics, Shanghai, China)

  • Powers Michael R.

    (Department of Finance, School of Economics and Management, and Schwarzman College, Tsinghua University, 386C Weilun Building, Beijing100084, China)

Abstract

For many decades, the analysis of underwriting-profitability regimes (i. e. successive “hard” and “soft” markets) has formed an important topic in insurance research. In the present article, we study the characteristics of firm-level underwriting results by applying both ordinary and Markov-switching autoregressive models to data from individual U.S. property-liability companies. The research employs both univariate and multivariate methods. Our analysis argues against the existence of distinct, firm-level underwriting regimes in the U.S. property-liability market, but offers evidence of cross-company interactions over time.

Suggested Citation

  • Feng Frank Y. & Powers Michael R., 2019. "Ordinary and Markov-Switching Autoregressive Models for Firm-Level Underwriting Data," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 13(2), pages 1-16, July.
    • Handle: RePEc:bpj:apjrin:v:13:y:2019:i:2:p:16:n:4
    DOI: 10.1515/apjri-2018-0031
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/apjri-2018-0031
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/apjri-2018-0031?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Chao-Chun Leng, 2006. "Stationarity and stability of underwriting profits in property-liability insurance: Part I," Journal of Risk Finance, Emerald Group Publishing, vol. 7(1), pages 38-48, January.
    2. Chao-Chun Leng, 2006. "Stationarity and stability of underwriting profits in property-liability insurance: Part II," Journal of Risk Finance, Emerald Group Publishing, vol. 7(1), pages 49-63, January.
    3. Mary A. Weiss, 2007. "Underwriting Cycles: A Synthesis and Further Directions," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 30(1), pages 31-46.
    4. Scott E. Harrington & Tong Yu, 2003. "Do Property‐Casualty Insurance Underwriting Margins Have Unit Roots?," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(4), pages 715-733, December.
    5. Kim, Chang-Jin, 1994. "Dynamic linear models with Markov-switching," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 1-22.
    6. Winter Ralph A., 1994. "The Dynamics of Competitive Insurance Markets," Journal of Financial Intermediation, Elsevier, vol. 3(4), pages 379-415, September.
    7. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    8. M. Martin Boyer & Eric Jacquier & Simon Van Norden, 2012. "Are Underwriting Cycles Real and Forecastable?," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 79(4), pages 995-1015, December.
    9. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388, December.
    10. Ursina B. Meier & J. François Outreville, 2006. "Business cycles in insurance and reinsurance: the case of France, Germany and Switzerland," Journal of Risk Finance, Emerald Group Publishing, vol. 7(2), pages 160-176, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Georges Dionne & Scott Harrington, 2017. "Insurance and Insurance Markets," Working Papers 17-2, HEC Montreal, Canada Research Chair in Risk Management.
    2. Shi‐jie Jiang & Jeffrey Tzu‐Hao Tsai & Feiyun Xiang, 2023. "Dynamics of underwriting profits in the US market: Payout patterns and regulation effects," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 3100-3118, July.
    3. Catherine Bruneau & Nadia Sghaier, 2014. "Cyclicity in the French Property," Working Papers 2014-47, Department of Research, Ipag Business School.
    4. Chin Nam Low & Heather Anderson & Ralph D. Snyder, 2006. "Beveridge-Nelson Decomposition with Markov Switching," Monash Econometrics and Business Statistics Working Papers 17/06, Monash University, Department of Econometrics and Business Statistics.
    5. Kim, Chang-Jin & Morley, James C. & Nelson, Charles R., 2001. "Does an intertemporal tradeoff between risk and return explain mean reversion in stock prices?," Journal of Empirical Finance, Elsevier, vol. 8(4), pages 403-426, September.
    6. Omokolade Akinsomi & Mehmet Balcilar & Rıza Demirer & Rangan Gupta, 2017. "The effect of gold market speculation on REIT returns in South Africa: a behavioral perspective," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(4), pages 774-793, October.
    7. Chang, Yoosoon & Maih, Junior & Tan, Fei, 2021. "Origins of monetary policy shifts: A New approach to regime switching in DSGE models," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    8. Zheng, Tingguo & Zuo, Haomiao, 2013. "Reexamining the time-varying volatility spillover effects: A Markov switching causality approach," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 643-662.
    9. Mehmet Pasaogullari & Simeon Tsonevy, 2011. "The term structure of inflation compensation in the nominal yield curve," Working Papers (Old Series) 1133, Federal Reserve Bank of Cleveland.
    10. Marcelle Chauvet & James D. Hamilton, 2006. "Dating Business Cycle Turning Points," Contributions to Economic Analysis, in: Nonlinear Time Series Analysis of Business Cycles, pages 1-54, Emerald Group Publishing Limited.
    11. Grace Lee, 2011. "Aggregate shocks decomposition for eight East Asian countries," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 16(2), pages 215-232.
    12. Yoosoon Chang & Fei Tan & Xin Wei, 2018. "State Space Models with Endogenous Regime Switching," CAEPR Working Papers 2018-012, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    13. Jean Marcelin B. Brou & Mbodja Mougoué & Eugene Kouassi & Kebaabetswe Thulaganyo & Benjamin K. Acquah, 2022. "Effects of diamond price volatility on stock returns: Evidence from a developing economy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1025-1043, January.
    14. Assenmacher-Wesche, Katrin, 2006. "Estimating Central Banks' preferences from a time-varying empirical reaction function," European Economic Review, Elsevier, vol. 50(8), pages 1951-1974, November.
    15. Massimo Guidolin, 2011. "Markov Switching Models in Empirical Finance," Advances in Econometrics, in: Missing Data Methods: Time-Series Methods and Applications, pages 1-86, Emerald Group Publishing Limited.
    16. Francis X. Diebold & Glenn D. Rudebusch, 2001. "Five questions about business cycles," Economic Review, Federal Reserve Bank of San Francisco, pages 1-15.
    17. Mount, Timothy D. & Ning, Yumei & Cai, Xiaobin, 2006. "Predicting price spikes in electricity markets using a regime-switching model with time-varying parameters," Energy Economics, Elsevier, vol. 28(1), pages 62-80, January.
    18. Levant, Jared & Ma, Jun, 2017. "A dynamic Nelson-Siegel yield curve model with Markov switching," Economic Modelling, Elsevier, vol. 67(C), pages 73-87.
    19. Tatsuma Wada & Pierre Perron, 2005. "An Alternative Trend-Cycle Decomposition using a State Space Model with Mixtures of Normals: Specifications and Applications to International Data," Boston University - Department of Economics - Working Papers Series WP2005-43, Boston University - Department of Economics.
    20. Yap, Josef T. & Majuca, Ruperto P. & Park, Cyn-Young, 2010. "The 2008 Financial Crisis and Potential Output in Asia: Impact and Policy Implications," Discussion Papers DP 2010-11, Philippine Institute for Development Studies.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:apjrin:v:13:y:2019:i:2:p:16:n:4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyterbrill.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.