The dynamic interactions among the stock,bond and insurance markets |
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| Affiliation: | 1. State Key Laboratory of Petroleum Resources and Prospecting, China University of Petroleum, Fuxue Road 18th, Beijing 102200, China;2. Jackson School of Geosciences, The University of Texas at Austin, University Station, Box X, Austin, TX 78713-8924, USA;1. Graduate School of Economics, Center for Computational Social Science, Kobe University, Kobe, Japan;2. National Institute of Information and Communications Technology, Tokyo, Japan;3. National Institute of Informatics, Tokyo, Japan;4. JST, ERATO, Kawarabayashi Large Graph Project, Tokyo, Japan |
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| 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. |
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| Keywords: | Insurance market Stock market Bond market Granger causality test Generalized impulse response |
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