Browse Research
Viewing 2751 to 2775 of 7690 results
2004
This article develops an asset allocation framework that incorporates prior beliefs about the extent of stock return predictability explained by asset pricing models. We find that when prior beliefs allow even minor deviations from pricing model implications, the resulting asset allocations depart considerably from and substantially outperform allocations dictated by either the underlying models or the sample evidence on return predictability.
2004
We build a model that helps to explain why increases in liquidity--such as lower bid-ask spreads, a lower price impact of trade, or higher turnover-predict lower subsequent returns in both firm-level and aggregate data. The model features a class of irrational investors, who underreact to the information contained in order flow, thereby boosting liquidity.
2004
We investigate the role of information in affecting a firm's cost of capital. We show that differences in the composition of information between public and private information affect the cost of capital, with investors demanding a higher return to hold stocks with greater private information.
2004
Motivated from second-order stochastic dominance, we introduce a risk measure that we call shortfall. We examine shortfall’s properties and discuss its relation to such commonly used risk measures as standard deviation, VaR, lower partial moments, and coherent risk measures.
2004
This paper explores the concepts underlying the valuation of an insurance company in the context of how other (non-insurance) companies are valued. Among actuaries, the value of an insurance company is often calculated as (i) adjusted net worth, plus (ii) the present value of future earning, less (iii) the cost of capital.
2004
We examine optimal insurance purchase decisions of individuals that exhibit behavior consistent with Regret Theory. Our model incorporates a utility function that assigns a disutility to outcomes that are ex post suboptimal, and predicts that individuals with regret-theoretical preferences adjust away from the extremes of full insurance and no insurance coverage.
2004
This paper explains the size and value "anomalies" in stock returns using an economically motivated two-beta model. We break the beta of a stock with the market portfolio into two components, one reflecting news about the market's future cash flows and one reflecting news about the market's discount rates.
2004
Classical theories of financial markets assume an infinitely liquid market and that all traders act as price takers. This theory is a good approximation for highly liquid stocks, although even there it does not apply well for large traders or for modelling transaction costs. We extend the classical approach by formulating a new model that takes into account illiquidities.
2004
Previous studies of financial health of insurance companies are mainly focused on insurers operating in the United States and developed economies. This article focuses on the solvency of general (property-liability) and life insurance companies in Asia using firm data and macro data separately. It uses different classification methods to classify the financial status of both general and life insurance companies.
2004
In this paper, we give the axiomatic characterization of risk measures and discuss the treads of developments in this area. The main recently proposed risk measures are presented, and their properties and relations are discussed. The corresponding versions of dynamic risk measure are also briefly introduced.
2004
Financial risk model evaluation or backtesting is a key part of the internal model's approach to market risk management as laid out by the Basle Committee on Banking Supervision. However, existing backtesting methods have relatively low power in realistic small sample settings. Our contribution is the exploration of new tools for backtesting based on the duration of days between the violations of the Value-at-Risk.
2004
Procedures for measuring exposure to market risk, and for allocating risk capital against it, have been put into place by banking authorities in Europe and the U.S. The next stage of the process, embodied in Basel II, brings operational risk into consideration as well.
2004
Using a windstorm simulation model developed by Applied Insurance Research, we analyze the effectiveness of catastrophic-loss index options in hedging hurricane losses for Florida insurers. The results suggest that insurers in the two largest size quartiles can hedge losses almost as effectively using contracts based on four intrastate indices as they can using contracts that settle on their own losses.
2004
This paper provides new information on the effects of organizational structure on efficiency by analyzing Spanish stock and mutual insurers over the period 1989-1997. We test the efficient structure hypothesis, which predicts that the market will sort organizational forms into market segments where they have comparative advantages, and the expense preference hypothesis, which predicts that mutuals will be less efficient than stocks.
2004
This paper presents a general approach and specific aspects of the valuation of P/C Insurers. It combines corporate finance, the economics of P/C Insurers, and actuarial versus financial views. Although the primary purpose of the paper is to investigate the acquisition valuation of P/C Insurers, its conclusions are applicable to other areas as well.
2004
The equity risk premium (ERP) is an essential building block of the market value of risk. In theory, the collective action of all investors results in an equilibrium expectation for the return on the market portfolio excess of the risk-free return, the ERP.
2004
This paper is based on a research report prepared for the Accountancy Task Force of The Geneva Association. It is a sequel to an earlier report: ‘‘The Search for an International Accounting Standard for Insurance’’.
2004
This paper provides a theoretical explanation for the common observation that people often fail to purchase insurance against low-probability high-loss events even when it is offered at favorable premiums. We hypothesize that individuals maximize expected utility but face an explicit or implicit cost to discovering the true probability of rare events.
2004
We propose an optimization approach to allocating economic capital, distinguishing between an allocation or raising principle and a measure for the risk residual. The approach is applied both at the aggregate (conglomerate) level and at the individual (subsidiary) level and yields an integrated solution to the capital allocation problem.
2004
A simple valuation model with time-varying investment opportunities is developed and estimated. The model assumes that the investment opportunity set is completely described by the real interest rate and the maximum Sharpe ratio, which follow correlated Ornstein2013Uhlenbeck processes. The model parameters and time series of the state variables are estimated using U.S.
2004
Risk Aversion and the Willingness to Pay for Insurance: A Cautionary Discussion of Adverse Selection
Textbooks frequently describe adverse selection as an almost inevitable feature of insurance markets with heterogeneous buyers and asymmetric information. But if low-risk applicants are more risk averse than their high-risk counterparts, the former may be as willing or more willing than the latter to purchase insurance at any given price.
2004
This article empirically investigates how the terrorist activity of September 11, 2001, was addressed by the insurance industry and government in the United States. It shows that the insurance system worked reasonably well in compensating losses suffered, albeit with various tribulations.
2004
In this paper, we investigate the relative performance of Value-at-Risk (VaR) models with the daily stock market returns of nine different emerging markets.
