| Item Type |
Journal paper
|
| Abstract |
Although insurance is the typical textbook example for an asset that negatively correlates with consumption, the suitability of the classical consumption‐based asset pricing model with power utility to explain historical premiums and claims has not yet been tested. We fill this gap by fitting it to property–casualty market data for Australia, Italy, the Netherlands, the United States, and Germany. In doing so, we reveal yet another asset pricing anomaly. More specifically, the consumption‐based model implies even larger relative risk aversion coefficients in the insurance sectors than in the equity markets of the aforementioned countries. To solve this puzzle, we draw on the loss aversion and narrow framing approach by Barberis, Huang, and Santos (2001) as well as the second‐degree expectation dependence framework by Dionne, Li, and Okou (2015), with encouraging results. |
| Authors |
Braun, Alexander; Luca, Daliana & Schmeiser, Hato |
| Journal or Publication Title |
Journal of Risk and Insurance |
| Language |
English |
| Subjects |
business studies |
| HSG Classification |
contribution to scientific community |
| Refereed |
No |
| Date |
1 September 2019 |
| Publisher |
Blackwell |
| Place of Publication |
Malden, Mass. [u.a] |
| Series Name |
Working Papers on Risk Management and Insurance |
| Volume |
86 |
| Number |
3 |
| Page Range |
629-661 |
| ISSN |
0022-4367 |
| ISSN-Digital |
1539-6975 |
| Publisher DOI |
https://doi.org/10.1111/jori.12230 |
| Official URL |
https://onlinelibrary.wiley.com/doi/10.1111/jori.1... |
| Depositing User |
Prof. Dr. Alexander Braun
|
| Date Deposited |
02 Nov 2015 10:24 |
| Last Modified |
25 Mar 2023 01:24 |
| URI: |
https://www.alexandria.unisg.ch/publications/245114 |
Consumption-Based Asset Pricing in Insurance Markets: Yet Another Puzzle?
