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- Title
The Relationship Between Risk and Return: Evidence for Property-Liability Insurance Stocks.
- Authors
Cummins, J. David; Harrington, Scott E.
- Abstract
This paper tests the relationship between property-liability insurer stock returns and systematic risk, unsystematic risk, and co-skewness during the period 1970-1983. The study is motivated by the use of the capital asset pricing model (CAPM) and other financial models in insurance rate regulation. Insurer stock return patterns are consistent with the CAPM during the period 1980–1983, but inconsistent with the CAPM during earlier periods. Unsystematic risk is significantly related to returns in some of the equations, contrary to the predictions of the CAPM. The results imply that determining the fair rate of return solely on the basis of the CAPM may lead to incorrect results.
- Subjects
RISK; RATE of return; INSURANCE stocks; LIABILITY insurance; CAPITAL; INSURANCE rates
- Publication
Journal of Risk & Insurance, 1988, Vol 55, Issue 1, p15
- ISSN
0022-4367
- Publication type
Article
- DOI
10.2307/253279