Portfolio similarity and asset liquidation in the insurance industry

An important assumption underlying the designation of some insurers as systemically important is that their overlapping portfolio holdings can result in common selling. We measure the overlap in holdings using cosine sim
An important assumption underlying the designation of some insurers as systemically important is that their overlapping portfolio holdings can result in common selling. We measure the overlap in holdings using cosine similarity, and show that insurers with more similar portfolios have larger subsequent common sales. This relationship can be magnified for some insurers when they are regulatory capital constrained or markets are under stress. When faced with an exogenous liquidity shock, insurers with greater portfolio similarity have even larger common sales that impact prices. Our measure can be used by regulators to predict which institutions may contribute most to financial instability through the asset liquidation channel of risk transmission.
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Metadaten
Author:Giulio Girardi, Kathleen W. Hanley, Stanislava Nikolova, Loriana Pelizzon, Mila Getmansky Sherman
URN:urn:nbn:de:hebis:30:3-472363
URL:https://ssrn.com/abstract=3239362
DOI:http://dx.doi.org/10.2139/ssrn.3239362
Parent Title (English):SAFE working paper series ; No. 224
Series (Serial Number):SAFE working paper series (224)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2018
Year of first Publication:2018
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2018/09/05
Tag:Asset Liquidation; Financial Stability; Insurance Companies; Interconnectedness; SIFI; Similarity
Issue:This Draft: July 30, 2018
Pagenumber:56
HeBIS PPN:436686333
Institutes:Wirtschaftswissenschaften
House of Finance (HoF)
Center for Financial Studies (CFS)
Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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