Portfolio Similarity and Asset Liquidation in the Insurance Industry

59 Pages Posted: 10 Oct 2017 Last revised: 14 Jul 2020

See all articles by Giulio Girardi

Giulio Girardi

Securities and Exchange Commission

Kathleen Weiss Hanley

Lehigh University - College of Business

Stanislava (Stas) Nikolova

University of Nebraska - Lincoln

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE; Ca Foscari University of Venice

Mila Getmansky Sherman

University of Massachusetts at Amherst - Eugene M. Isenberg School of Management - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: July 2, 2020

Abstract

We examine whether the concern of academics and regulators about the potential for insurers to
sell similar assets due to the overlap in their holdings is justified. We measure this overlap using
cosine similarity and find that insurers with more similar portfolios have larger subsequent common
sales. When faced with a shock to their assets or liabilities, exposed insurers with greater portfolio
similarity have larger common sales that impact prices. Our portfolio similarity measure can be
used by regulators to predict the common selling of any institution that reports security or asset
class holdings regardless of its public company status, making the measure a useful ex-ante predictor of divestment behavior in times of market stress.

Keywords: Interconnectedness, asset liquidation, similarity, financial stability, insurance companies, fire sales

JEL Classification: G11, G18, G2

Suggested Citation

Girardi, Giulio and Hanley, Kathleen Weiss and Nikolova, Stanislava (Stas) and Pelizzon, Loriana and Getmansky Sherman, Mila, Portfolio Similarity and Asset Liquidation in the Insurance Industry (July 2, 2020). Available at SSRN: https://ssrn.com/abstract=3050561 or http://dx.doi.org/10.2139/ssrn.3050561

Giulio Girardi

Securities and Exchange Commission ( email )

Washington, DC
United States

Kathleen Weiss Hanley

Lehigh University - College of Business ( email )

Bethlehem, PA 18015
United States

Stanislava (Stas) Nikolova (Contact Author)

University of Nebraska - Lincoln ( email )

Lincoln, NE 68588-0490
United States
402-472-6049 (Phone)

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, D-60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

HOME PAGE: http://www.safe-frankfurt.de

Ca Foscari University of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy

Mila Getmansky Sherman

University of Massachusetts at Amherst - Eugene M. Isenberg School of Management - Department of Finance ( email )

Amherst, MA 01003-4910
United States

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

Paper statistics

Downloads
966
Abstract Views
4,703
rank
23,730
PlumX Metrics