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Conventional tests of the predictability of stock returns could be invalid, that is reject the null too frequently, when the predictor variable is persistent and its innovations are highly correlated with returns. We develop a pretest to determine whether the conventional t-test leads to invalid...
Persistent link: https://www.econbiz.de/10011139938
Liabilities ceded by life insurers to shadow reinsurers (i.e., affiliated and less regulated off-balance-sheet entities) grew from $11 billion in 2002 to $364 billion in 2012. Life insurers using shadow insurance, which capture half of the market share, ceded 25 cents of every dollar insured to...
Persistent link: https://www.econbiz.de/10011096611
We develop an asset pricing model with rich heterogeneity in asset demand across investors, designed to match institutional holdings data. The equilibrium price vector is uniquely determined by market clearing, which equates the supply of each asset to aggregate demand. We estimate the model on...
Persistent link: https://www.econbiz.de/10011261855
retiree at age 65, and the welfare gain is about 10% of wealth for the healthiest.
Persistent link: https://www.econbiz.de/10011080949
cross-section, a strategy that is long on durables and short on services earns a sizable risk premium. In the time series, a strategy that is long on durables and short on the market portfolio earns a countercyclical risk premium. We develop an equilibrium asset-pricing model that explains these...
Persistent link: https://www.econbiz.de/10011082159
Developing risk in the life insurance industry requires prudent policy response to prevent broader economic damage.
Persistent link: https://www.econbiz.de/10011127930
Liabilities ceded by life insurers to shadow reinsurers (i.e., less regulated and unrated off-balance-sheet entities) grew from $11 billion in 2002 to $364 billion in 2012. Life insurers using shadow insurance, which capture half of the market share, ceded 25 cents of every dollar insured to...
Persistent link: https://www.econbiz.de/10011183206
We develop a pair of risk measures, health and mortality delta, for the universe of life and health insurance products. A life-cycle model of insurance choice simplifies to replicating the optimal health and mortality delta through a portfolio of insurance products. We estimate the model to...
Persistent link: https://www.econbiz.de/10010796803
During the financial crisis, life insurers sold long-term policies at deep discounts relative to actuarial value. The average markup was as low as −19 percent for annuities and −57 percent for life insurance. This extraordinary pricing behavior was due to financial and product market...
Persistent link: https://www.econbiz.de/10011026988
We derive the optimal portfolio of longevity products during the retirement phase. The households health state moves stochastically and the longevity products are priced consistent with equilibrium in the insurance market. The household has recursive preferences, which allows us to study the...
Persistent link: https://www.econbiz.de/10011004616