IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v34y2021i3p1509-1539..html
   My bibliography  Save this article

Asset Insulators
[Asset pricing and the bid-ask spread]

Author

Listed:
  • Gabriel Chodorow-Reich
  • Andra Ghent
  • Valentin Haddad

Abstract

We construct a new data set tracking the daily value of life insurers’ assets at the security level. Outside of the 2008–2009 crisis, a1 drop in the market value of assets reduces an insurer’s market equity by0.10. During the ?nancial crisis, this pass-through rises to1. We explain this pattern by viewing insurance companies as asset insulators, institutions with stable, long-term liabilities that can ride out transitory dislocations in market prices. Illustrating the macroeconomic importance of insulation, insurers’ market equity declined by 50 billion less than the duration-adjusted value of their securities during the crisis.

Suggested Citation

  • Gabriel Chodorow-Reich & Andra Ghent & Valentin Haddad, 2021. "Asset Insulators [Asset pricing and the bid-ask spread]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1509-1539.
    • Handle: RePEc:oup:rfinst:v:34:y:2021:i:3:p:1509-1539.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rfs/hhaa061
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Irani, Rustom & Iyer, Rajkamal & Meisenzahl, Ralf & Peydró, José-Luis, 2021. "The rise of shadow banking: Evidence from capital regulation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 34(5), pages 2181-2235.
    2. Timmer, Yannick, 2018. "Cyclical investment behavior across financial institutions," Journal of Financial Economics, Elsevier, vol. 129(2), pages 268-286.
    3. Nicola Fusari & Wei Li & Haoyang Liu & Zhaogang Song, 2020. "Asset Pricing with Cohort-Based Trading in MBS Markets," Staff Reports 931, Federal Reserve Bank of New York.
    4. Wagner, Wolf & Kartasheva, Anastasia & Chotibhak, Jotikasthira & Ellul, Andrew & Lundblad, Christian, 2018. "Insurers as Asset Managers and Systemic Risk," CEPR Discussion Papers 12849, C.E.P.R. Discussion Papers.

    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    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:oup:rfinst:v:34:y:2021:i:3:p:1509-1539.. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

    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.