Asymmetric Partial Adjustment toward Target Liquidity: Evidence from U.S. Property-Liability Insurance Industry

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Title:	Asymmetric Partial Adjustment toward Target Liquidity: Evidence from U.S. Property-Liability Insurance Industry
Authors:	Vincent, Y.Chang;Melody, H.Yang
Contributors:	Department of Insurance and of Finance Chaoyang University of Technology, Taiwan.
Keywords:	optimal (target) liquidity, partial adjustment model, asymmetric partial adjustment, speed of adjustment
Date:	2012
Issue Date:	2013-08-07 01:30:42 (UTC+0)
Publisher:	Department of Insurance and of Finance Chaoyang University of Technology, Taiwan.
Abstract:	In this paper we study whether the insurer’s optimal liquidity exists and how and when insurer adjusts to optimal liquidity if it exists. We employ a pooled time-series and cross-sectional data for U.S. property-liability insurance industry reported from 2006 to 2010 and implement a partial adjustment model, which is proposed by Byoun 2008) and Dang, Garrett, and Nguyen (2011), to examine our main issues. The empirical results indicate that insurers tend to have a targeted liquidity and adjust toward their target liquidity over time, which is consistent to Venkiteshwaran (2011). In addition, asymmetric partial adjustment does exist for insurers with above-target or below-target liquidity as well as with high- or low-leverage. The evidence indicates that the adjustment speed of below target liquidity is faster than above-target liquidity, which is consistent to the financial pressure hypothesis. Nevertheless, the speeds of partial adjustment for insurers with high- and low-leverage support distinct hypotheses in terms of different liquidity measurements.
Relation:	2012中部學術財金研討會論文發表
Appears in Collections:	[Department of Finance] Proceedings

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