Centro de Documentación de Fundación MAPFRE - Estimating the cost of equity capital for insurance firms with multiperiod asset pricing models

Notes: Resumen: Previous research on insurer cost of equity (COE) focuses on single-period asset pricing models. In reality, however, investment and consumption decisions are made over multiple periods, exposing firms to time-varying risks related to economic cycles and market volatility. We extend the literature by examining two multiperiod models-the conditional capital asset pricing model (CCAPM) and the intertemporal CAPM (ICAPM). Using 29 years of data, we find that macroeconomic factors significantly influence and explain insurer stock returns. Insurers have countercyclical beta, implying that their market risk increases during recessions. Further, insurers are sensitive to volatility risk (the risk of losses when volatility goes up), but not to insurance-specific risks, financial industry risks, liquidity risk, or coskewness after controlling for other economy-wide factors.Related records: En: The Journal of risk and insurance. - Nueva York : The American Risk and Insurance Association, 1964- = ISSN 0022-4367. - 02/03/2020 Volumen 87 Número 1 - marzo 2020 , p. 213-245Materia / lugar / evento: Empresas de seguros Valor capital Inversiones financieras Toma de decisiones Ciclos económicos Gestión de activos Riesgo sistémico Derivados de volatilidad Control de riesgos Liquidez Cálculo actuarial Otros autores: Xu, Jianren
Pottier, Steven W.
Other categories: 6

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