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Foreign investments of Japanese life insurance companies

Author

Listed:
  • Chen, Steven Shu-Hsiu

Abstract

We investigate Japanese life insurance companies’ investment returns or volatilities and their discretionary decisions on foreign portfolio investments. These decisions include the proportion of foreign investments in the companies’ proprietary investments and the currency risk hedge. We consider the “carry trade” scenario when the market favors investing in high-yield currencies by borrowing the Japanese yen. We establish three results. First, the currency hedge relates positively to the investment returns under the carry trade scenario but negatively otherwise. Second, the proportion of foreign investments relates positively to the investment returns. Third, the investment returns significantly decrease under the carry trade scenario.

Suggested Citation

  • Chen, Steven Shu-Hsiu, 2024. "Foreign investments of Japanese life insurance companies," Economics Letters, Elsevier, vol. 240(C).
    • Handle: RePEc:eee:ecolet:v:240:y:2024:i:c:s0165176524002581
    DOI: 10.1016/j.econlet.2024.111774
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    More about this item

    Keywords

    Japanese life insurance companies; Carry trade; Foreign investments; Currency risk; Currency hedging;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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