Chodorow-Reich, Gabriel
[Verfasser:in]
;
Ghent, Andra
[Sonstige Person, Familie und Körperschaft];
Haddad, Valentin
[Sonstige Person, Familie und Körperschaft]National Bureau of Economic Research
Erschienen:
Cambridge, Mass: National Bureau of Economic Research, 2018
Erschienen in:NBER working paper series ; no. w24973
Umfang:
1 Online-Ressource; illustrations (black and white)
Sprache:
Englisch
DOI:
10.3386/w24973
Identifikator:
Reproduktionsnotiz:
Hardcopy version available to institutional subscribers
Entstehung:
Anmerkungen:
System requirements: Adobe [Acrobat] Reader required for PDF files
Mode of access: World Wide Web
Beschreibung:
We propose that financial institutions can act as asset insulators, holding assets for the long run to protect their valuations from consequences of exposure to financial markets. We demonstrate the empirical relevance of this theory for the balance sheet behavior of a large class of intermediaries, life insurance companies. The pass-through from assets to equity is an especially informative metric for distinguishing the asset insulator theory from Modigliani-Miller or other standard models. We estimate the pass-through using security-level data on insurers' holdings matched to corporate bond returns. Uniquely consistent with the insulator view, outside of the 2008-2009 crisis insurers lose as little as 15 cents in response to a dollar drop in asset values, while during the crisis the pass-through rises to roughly 1. The rise in pass-through highlights the fragility of insulation exactly when it is most valuable