In Search of Habitat

72 Pages Posted: 19 Apr 2012 Last revised: 4 Jun 2021

See all articles by Xuanjuan Chen

Xuanjuan Chen

Shanghai University of Finance and Economics

Zhenzhen Sun

University of Massachusetts Dartmouth; University of Massachusetts Dartmouth

Tong Yao

University of Iowa - Henry B. Tippie College of Business

Tong Yu

University of Cincinnati - Department of Finance - Real Estate

Date Written: December 1, 2013

Abstract

We perform portfolio-level analysis to understand insurance firms' preferred-habitat behavior in the government bond market. Based on portfolio durations and portfolio weights across maturities, we find that individual insurers' interest rate risk exposures and portfolio elasticities are related to characteristics of operating liabilities and corporate financing constraints. We show that such habitat behavior has a significant impact on bond pricing -- during the "quantitative easing" era, the bond purchases by the Federal Reserve have a larger impact on the yields of Treasury bonds with a higher habitat demand.

Keywords: Preferred habitat; bond yield; quantitative easing

Suggested Citation

Chen, Xuanjuan and Sun, Zhenzhen and Yao, Tong and Yu, Tong, In Search of Habitat (December 1, 2013). Available at SSRN: https://ssrn.com/abstract=2042648 or http://dx.doi.org/10.2139/ssrn.2042648

Xuanjuan Chen

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Zhenzhen Sun

University of Massachusetts Dartmouth ( email )

285 Old Westport Road
Dartmouth, MA 02747-2300
United States

University of Massachusetts Dartmouth ( email )

285 Old Westport Road
N Dartmouth, MA 02747-2300
United States

Tong Yao (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States

Tong Yu

University of Cincinnati - Department of Finance - Real Estate ( email )

College of Business Administration
Cincinnati, OH 45221
United States
4019548606 (Phone)
4019548606 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,233
Abstract Views
3,990
rank
20,029
PlumX Metrics