Robert Westphalen
Last Name
Westphalen
First name
Robert
Email
robert.westphalen@unisg.ch
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Item type:Publication, Cost of Capital Estimates for Insurance Stocks with Jump Risk Premia: Evidence from U.S. Life and P&C Insurers(2026-07-28); ; We estimate the cost of capital of insurance companies based on a high-frequency factor model that captures jump risk and time-varying factor loadings. Using a large panel of intraday returns, we obtain cost of equity estimates for U.S. property and casualty (P&C) insurers and life insurers over the period 2004 to 2020. We find that P&C and life insurers exhibit markedly different continuous and jump risk exposures, reflecting differences in their business models. We confirm prior findings that P&C insurers’ cost of equity is below the U.S. market average. In contrast, the evidence for life insurers is mixed. While cost of equity estimates for life insurers are higher when using traditional specifications based on the market factor alone, the estimates decrease markedly when additional risk factors and jump components are included. Overall, our findings suggest that cost of capital estimates for insurance companies should take systematic jump risk exposure into account.Type:conference paper