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Do life insurance stocks provide superior returns?

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  • Mohammad Najand

    (College of Business and Public Administration, Old Dominion University)

  • John Griffith
  • David C Marlett

Abstract

This paper examines the risk/return relationship for life insurance stock returns using generalised autoregressive conditional heteroscedastic-capital asset pricing model (CAPM-GARCH). Prior studies use the traditional CAPM and fail to find risk-adjusted returns. Using CAPM-GARCH, we find that life insurance stocks provided 7.96 per cent risk-adjusted returns for the period 1985–2003. For the subperiods 1991–96 and 1997–2003, we find that life insurance stocks produced abnormal returns of 14.61 and 12.85 per cent, respectively. Based on these findings, we feel that financial analysts should recommend life insurance stocks for any well-diversified portfolio.

Suggested Citation

  • Mohammad Najand & John Griffith & David C Marlett, 2007. "Do life insurance stocks provide superior returns?," Journal of Asset Management, Palgrave Macmillan, vol. 8(1), pages 52-57, May.
    • Handle: RePEc:pal:assmgt:v:8:y:2007:i:1:d:10.1057_palgrave.jam.2250058
    DOI: 10.1057/palgrave.jam.2250058
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