Life insurer cost of equity with asymmetric risk factors
Date
2015-07-16
Authors
Bajtelsmit, Vickie L., author
Villupuram, Sriram V., author
Wang, Tianyang, author
The Financial Review, publisher
Journal Title
Journal ISSN
Volume Title
Abstract
This study presents an improved model for estimating life insurer cost of capital with the inclusion of upside and downside risk factors and controlling for life insurer characteristics. Although various asymmetric measures of market risk have been shown to be priced factors for the broader equity market, life insurer realized equity returns include a much larger premium for bearing downside risk, even after controlling for firm characteristics and other measures of risk. Crossâsectional regression analysis finds a positive (negative) premium for downside (upside) betas, conditional on down and up markets, respectively. Coskewness and cokurtosis are also priced factors.
Description
Includes bibliographical references (pages 17-19).
Published as: The Finanicial Review, vol. 50, no. 3, July 2015, pp. 435-457, https://doi.org/10.1111/fire.12073.
Published as: The Finanicial Review, vol. 50, no. 3, July 2015, pp. 435-457, https://doi.org/10.1111/fire.12073.
Rights Access
Subject
cost of equity
upside risk
downside risk
equity market
life insurance industry
prospect theory