Interest Rate Sensitivity of Financial Institutions by Liquidity Risk: Evidence from U.S. Property/Liability Insurers

Authors

  • Jin Park Illinois Wesleyan University
  • Byeongyong Choi Howard University

Abstract

Attempts to understand the impact of interest rate changes on common stock returns have resulted in numerous studies in finance literature, and significant interest rate sensitivity by stocks of financial institutions has been reported. This paper extends the extant literature by investigating US property-liability (P/L) insurer's stock returns with respect to changes in different termed interest rates and to liquidity risk of the stocks. First, returns on property/liability insurers stocks are influenced by changes in interest rates, but the direction shifts as the insurance market condition changes. This is true for every portfolio we studied, albeit at different magnitudes. Second, trading volume also plays a role in stock returns to interest rate changes.

Downloads

Published

2007-06-30

How to Cite

Park, Jin, and Byeongyong Choi. 2007. “Interest Rate Sensitivity of Financial Institutions by Liquidity Risk: Evidence from U.S. Property/Liability Insurers”. Journal of Finance Issues 5 (1):88-98. https://jfi.aof-mbaa.org/index.php/jfi/article/view/2588.

Issue

Section

Original Article