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Insurance Stock Returns and Economic Growth

  • Chunyang Zhou

    (Room 502, Antai Building, Antai College of Economics & Management, Shanghai Jiao Tong University, No 535, Fahuazhen Road, Shanghai 200052, China. E-mails: cyzhou@sjtu.edu.cn; cfwu@sjtu.edu.cn)

  • Chongfeng Wu

    (Room 502, Antai Building, Antai College of Economics & Management, Shanghai Jiao Tong University, No 535, Fahuazhen Road, Shanghai 200052, China. E-mails: cyzhou@sjtu.edu.cn; cfwu@sjtu.edu.cn)

  • Donghui Li

    (School of Banking and Finance, Australian School of Business, University of New South Wales, Sydney, NSW 2052, Australia. E-mails: donghui@unsw.edu.au; zhianchen@unsw.edu.au)

  • Zhian Chen

    (School of Banking and Finance, Australian School of Business, University of New South Wales, Sydney, NSW 2052, Australia. E-mails: donghui@unsw.edu.au; zhianchen@unsw.edu.au)

Registered author(s):

    In this paper, we propose to use insurance stock returns as an indicator of insurance activities, and apply a dynamic panel technique to examine the link between the role of insurance and economic growth. Our empirical results show that after we control for the variations of market index returns, there is a significantly positive relationship between insurance stock returns and future economic growth. Furthermore, we also investigate how law environment and governance quality affect the link between the role of insurance and economic growth. The empirical results are consistent with our expectation that a well-defined law environment and governance quality facilitate the functioning of insurance companies, and strengthen the role of insurance in economic growth. We find generally that the effect of law and governance on the link between the role of insurance and economic growth is more significant in developed markets than in emerging markets.

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    Article provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance Issues and Practice.

    Volume (Year): 37 (2012)
    Issue (Month): 3 (July)
    Pages: 405-428

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    Handle: RePEc:pal:gpprii:v:37:y:2012:i:3:p:405-428
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