The aim of this article is to study the adjustment dynamics of the non-life insurance premium (NLIP) and test its dependence to the financial markets in five countries (Canada, France, Japan, the United Kingdom, and the United States). First, we justify the linkage between the insurance and the financial markets by the underwriting cycle theory and financial models of insurance pricing. Second, we examine the relationship between the NLIP, the interest rate, and the stock price using the recent developments of nonlinear econometrics. We use threshold cointegration models: the switching transition error correction models (STECM). We show that STECM perform better than a linear error correction model (LECM) to reproduce the NLIP dynamics. Our empirical results show that the adjustment of the NLIP in France, Japan, and the United States is rather discontinuous, asymmetrical, and nonlinear. Moreover, we suggest a strong evidence of significant linkages between insurance and financial markets, show two regimes for the NLIP, and find that the NLIP adjustment toward equilibrium is time varying with a convergence speed that varies according to the insurance disequilibrium size. Copyright (c) The Journal of Risk and Insurance, 2009.
This paper investigates the dependence structure between daily oil price changes and stock market returns in six GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates) during the period from June 1, 2005 to February 11, 2013. For that, we apply copula functions that capture several dependence structures. The empirical results provide evidence of positive and asymmetric dependence between oil price changes and stock market returns. All countries (except Oman) exhibit left tail dependence while Oman shows right tail dependence. Moreover, we check whether the dependence structure is constant over time using change point testing method. The empirical results indicate significant change in the dependence structure. For all countries, the copula parameters and tail dependence coefficients are greater during financial period than tranquil implying a presence of contagion effect.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.