Portfolio similarity and asset liquidation in the insurance industry

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SAFE Working Paper ; No. 224

Classification and Topics

• Classification: Wirtschaft ; Portfolio Choice; Investment Decisions ; General Financial Markets: Government Policy and Regulation
• Subject: Interconnectedness ; Asset Liquidation ; Similarity ; Financial Stability ; Insurance Companies ; SIFI

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Girardi, Giulio ; Hanley, Kathleen Weiss ; Nikolova, Stanislava ; Pelizzon, Loriana ; Getmansky, Mila
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
• (where): Frankfurt a. M.
• (when): 2018

Further information

• DOI: doi:10.2139/ssrn.3239362
• Handle: http://hdl.handle.net/10419/181754
• URN: urn:nbn:de:hebis:30:3-472363
• Last update: 10.03.2025, 11:43 AM CET