Search Results
Newsletter
How liquid are U.S. life insurance liabilities?
This article describes the liquidity of various life insurance products and provides a measure that can be used to characterize the liquidity of the liabilities of the industry as a whole or of a particular firm.
Working Paper
Why do firms go public? evidence from the banking industry
The lack of data on private firms has made it difficult to empirically examine theories of why firms go public. However, both public and private banks must disclose financial information to regulators. We exploit this requirement to explore the going-public decision. Our results indicate that banks that convert to public ownership are more likely to become targets than control banks that remain private. Banks that go public are also more likely to become acquirers than control banks. IPO banks grow faster than control banks after going public, although there is some evidence that their ...
Journal Article
Bubble, bubble, toil, and trouble
The rapid rise of real estate prices in recent years has led to fears of a housing price bubble. But, to determine whether there has been a bubble?and whether the bubble is bursting?one needs to know what home prices ?should? be. The authors estimate a simple model of home prices and find that prices were, on average, above their predicted levels during 2000?06. However, this result does not hold true uniformly across the country. To the extent that prices were overheating, this was happening largely in markets that have traditionally exhibited volatile prices
Working Paper
Banks and derivatives
Working Paper
Why do borrowers make mortgage refinancing mistakes?
Refinancing a mortgage is often one of the biggest and most important financial decisions that people make. Borrowers need to choose the interest rate differential at which to refinance and, when that differential is reached, they need to take the steps to refinance before rates change again. The optimal differential is where the interest saved by refinancing equals the sum of refinancing costs and the option value of refinancing. Using a unique panel data set, we find that approximately 59% of borrowers refinance sub-optimally ? with 52% of the sample making errors of commission (choosing ...
Journal Article
The sensitivity of life insurance firms to interest rate changes
The authors examine the interest rate risk of life insurers by estimating the sensitivity of their stock returns to changes in the return on bonds over a time frame that includes a relatively calm period before the recent financial crisis, the financial crisis itself, and the recent period of low interest rates. They find that when bonds increase in value (that is, when interest rates fall), stocks of large insurance firms decrease in value more than those of their smaller counterparts.