When: 
Monday, April 29, 2019 - 12:00pm - 1:00pm
Where: 
Simon 125
Presenter: 
Kathleen Weiss Hanley - Lehigh University
Price: 
Free

An important assumption underlying the designation of some insurers as systemically important is that their overlapping portfolio holdings can result in common selling. We measure the overlap in holdings using cosine similarity, and show that insurers with more similar portfolios have larger subsequent common sales. This relationship can be magnied for some insurers when they are regulatory capital constrained or markets are under stress. When faced with an exogenous liquidity shock, insurers with greater portfolio similarity have even larger common sales that impact prices. Our measure can be used by regulators to predict which institutions may contribute most to financial instability through the asset liquidation channel of risk transmission.

Sponsored by: 
Department of Economics