The Cross-Section of Expected Stock Returns in the Property/Liability Insurance Industry
Journal
Journal of Banking & Finance
ISSN
0378-4266
Type
journal article
Date Issued
2018-11
Author(s)
Abstract
We conduct a comprehensive asset pricing analysis for the U.S. property/liability insurance industry using monthly data from 1988 to 2015. We find that state-of-the-art models such as the Fama and French (2015) five-factor model cannot explain the returns of property/liability insurance stocks in a satisfactory way. We adapt the model proposed by Adrian et al. (2015) for financial institutions and define an insurance-specific five-factor asset pricing model (INS5), which can explain the cross-section of property/liability insurance-stock returns better than competing models. The priced factors are the market return, the book-to-market ratio, return on equity, short-term reversal, and the spread between the property/liability insurance sector and the market return.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Elsevier
Volume
96
Start page
292
End page
321
Division(s)
Eprints ID
259922
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Ben Ammar Eling Milidonis JBF 2018 Vorschau.jpg
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