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The dynamic interactions among the stock, bond and insurance markets

Author

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  • Lee, Chien-Chiang
  • Huang, Wei-Ling
  • Yin, Chun-Hao

Abstract

This paper explores the lead–lag relationships and the dynamic linkages among stock, insurance and bond markets in the developed countries. This is the first empirical study which sheds light on the extent and magnitude of the association among these financial markets used by the Granger causality test of Toda and Yamamoto (1995), generalized impulse response approach, and generalized variance decomposition in a multivariate setting. Our empirical results illustrate that there are indeed various patterns of dynamic relationships. The direction of causality appears to differ across countries. While investigating these interactive relationships under unexpected shocks, there is a one-way significant influence between the life insurance premium and long-run interest rate. These empirical findings serve as valuable applications not only for investors to diversify their risk away as well as to earn the abnormal return, but also for policy-makers to allocate resources more efficiently.

Suggested Citation

  • Lee, Chien-Chiang & Huang, Wei-Ling & Yin, Chun-Hao, 2013. "The dynamic interactions among the stock, bond and insurance markets," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 28-52.
    • Handle: RePEc:eee:ecofin:v:26:y:2013:i:c:p:28-52
    DOI: 10.1016/j.najef.2013.04.003
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    More about this item

    Keywords

    Insurance market; Stock market; Bond market; Granger causality test; Generalized impulse response;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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