Crisis Sentiment in the U.S. Insurance Sector

Irresberger, Felix; Konig, Fee Elisabeth; Weiß, Gregor N.F.

Abstract

We use Internet search volume data to measure idiosyncratic and market‐wide crisis sentiment to explain insurer stock return volatility. We find that market‐level crisis sentiment was a significant predictor of stock return volatility of U.S. insurers between 2006 and 2010. Higher levels of crisis sentiment are associated with higher levels of price uncertainty. This effect is strongest for insurers with less exposure to the adverse effects of the financial crisis. Further, crisis sentiment also affects the cross‐section of movements in insurer stock prices. Our results imply that investors exited insurer stocks mainly due to crisis sentiment rather than a rational assessment of the insurers’ actual exposure to the crisis.

Citation

Irresberger, F., Konig, F. E., & Weiß, G. N. (2017). Crisis Sentiment in the U.S. Insurance Sector. Journal of Risk and Insurance, 84(4), 1295-1330. https://doi.org/10.1111/jori.12156

• Journal Article Type: Article
• Acceptance Date: Mar 3, 2016
• Online Publication Date: Jun 9, 2016
• Publication Date: 2017-12
• Deposit Date: Jul 23, 2020
• Publicly Available Date: Jul 24, 2020
• Journal: Journal of Risk and Insurance
• Print ISSN: 0022-4367
• Electronic ISSN: 1539-6975
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 84
• Issue: 4
• Pages: 1295-1330
• DOI: https://doi.org/10.1111/jori.12156
• Public URL: https://durham-repository.worktribe.com/output/1265677