Return attribution analysis of the UK insurance portfolios
We examine the attribution of premium growth rates for the five main insurance sectors of the United Kingdom for the period 1969-2005; in particular, Property, Motor, Pecuniary, Health & Accident, and Liability. In each sector, the growth rates of aggregate insurance premiums are viewed as portfolio returns which we attribute to a number of factors such as realized and expected losses and expenses, their uncertainty and market power, using the Sharpe (1988, 1992) Style Analysis. Our estimation method differs from the standard least squares practice which does not provide confidence intervals for style betas and adopts a Bayesian approach, resulting in a robust estimate of the entire empirical distribution of each beta coefficients for the full sample. We also perform a rolling analysis of robust estimation for a window of seven overlapping samples. Our empirical findings show that there are some main differences across industries as far as the weights attributed to the underlying factors. Rolling regressions assist us to identify the variability of these weights over time, but also across industries.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- J. David Cummins, 2000. "Allocation of Capital in the Insurance Industry," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 3(1), pages 7-27, 03.
- Kim, Tae-Hwan & White, Halbert & Stone, Douglas, 2000.
"Asymptotic and Bayesian Confidence Intervals for Sharpe Style Weights,"
University of California at San Diego, Economics Working Paper Series
qt5h98h28m, Department of Economics, UC San Diego.
- Tae-Hwan Kim, 2005. "Asymptotic and Bayesian Confidence Intervals for Sharpe-Style Weights," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 3(3), pages 315-343.
- Richard D. Phillips & J. David Cummins & Franklin Allen, 1996. "Financial Pricing of Insurance in the Multiple Line Insurance Company," Center for Financial Institutions Working Papers 96-09, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Cummins, J. David & Danzon, Patricia M., 1997. "Price, Financial Quality, and Capital Flows in Insurance Markets," Journal of Financial Intermediation, Elsevier, vol. 6(1), pages 3-38, January.
- Anthony Hall & Soosung Hwang & Stephen E. Satchell, 2000.
"Using Bayesian Variable Selection Methods to Choose Style Factors in Global Stock Return Models,"
Econometric Society World Congress 2000 Contributed Papers
1213, Econometric Society.
- Hall, Anthony D. & Hwang, Soosung & Satchell, Stephen E., 2002. "Using Bayesian variable selection methods to choose style factors in global stock return models," Journal of Banking & Finance, Elsevier, vol. 26(12), pages 2301-2325.
- Stephen Satchell & Soosung Hwang & Anthony Hall, 1999. "Using Bayesian Variable Selection Methods to Choose Style Factors in Global Stock Return Models," Working Papers wp99-01, Warwick Business School, Finance Group.
- Anthony D. Hall & Soosung Hwang & Steve Satchell, 2000. "Using Bayesian Variable Selection Methods to Choose Style Factors in Global Stock Return Models," Research Paper Series 31, Quantitative Finance Research Centre, University of Technology, Sydney.
- Geweke, John, 1986. "Exact Inference in the Inequality Constrained Normal Linear Regression Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(2), pages 127-41, April.
- Emmanouel Mamatzakis & Christos Staikouras, 2006. "A micro-econometric model of the UK property-liability insurance industry," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(4), pages 257-260, July.
- Kloek, Tuen & van Dijk, Herman K, 1978. "Bayesian Estimates of Equation System Parameters: An Application of Integration by Monte Carlo," Econometrica, Econometric Society, vol. 46(1), pages 1-19, January.
- Soosung Hwang & Stephen E. Satchell, 2007.
"The disappearance of style in the US equity market,"
Applied Financial Economics,
Taylor & Francis Journals, vol. 17(8), pages 597-613.
- Stephen Satchell & Soosung Hwang, 1999. "The Disappearance of Style in the US Equity Market," Working Papers wp99-18, Warwick Business School, Finance Group.
- Winter Ralph A., 1994. "The Dynamics of Competitive Insurance Markets," Journal of Financial Intermediation, Elsevier, vol. 3(4), pages 379-415, September.
- Harrington, Scott E & Danzon, Patricia M, 1994. "Price Cutting in Liability Insurance Markets," The Journal of Business, University of Chicago Press, vol. 67(4), pages 511-38, October.
When requesting a correction, please mention this item's handle: RePEc:kap:annfin:v:6:y:2010:i:3:p:405-420. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Christopher F. Baum)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.