Identifying permanent and transitory risks in the Chinese property insurance market |
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| Institution: | 1. Institute of International Finance, 1333 H Street, Washington, DC 20005, USA;2. College of Economics & Academy of Financial Research, Zhejiang University, Hangzhou 310027, China;1. Department of Finance, Western Kentucky University, Bowling Green, KY 42101, United States;2. Department of Finance, National University of Kaohsiung, Kaohsiung, Taiwan;3. Department of Finance, National Chengchi University, Taipei, Taiwan;1. Imaging Genetics Center, Institute for Neuroimaging and Informatics, University of Southern California, Los Angeles, CA, USA;2. Centre for Magnetic Resonance, School of Psychology, University of Queensland, Brisbane, Queensland, Australia;3. Functional Magnetic Resonance Imaging Laboratory, School of Psychology, University of Queensland, Brisbane, Queensland, Australia;4. Genetic Epidemiology Laboratory, Queensland Institute of Medical Research, Brisbane, Australia;5. Department of Radiology, UC San Francisco, San Francisco, CA, USA;6. Department of Medicine, UC San Francisco, San Francisco, CA, USA;7. Department of Psychiatry, UC San Francisco, San Francisco, CA, USA;8. Department of Veterans Affairs Medical Center, San Francisco, CA, USA;1. State Key Laboratory of Quality Research in Chinese Medicine, Institute of Chinese Medical Sciences, University of Macau, Macao;2. Department of Political Science, National Cheng Kung University, Tainan, Taiwan |
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| Abstract: | This paper develops a theoretical model to identify various risks in the Chinese property insurance market. Consequently, we apply a structural VAR model to quantify the magnitude, historical timing of these risks, and their dynamic impacts on the permanent and transitory components of the insurance premiums. The results indicate that the enormous amount of speculative funds flowing into China has aggravated insurance premiums as well as helped accelerate market volatilities due to its uncertain nature to the domestic economy and its short-term characteristic of investing. In particular, the speculative shock is shown to be the primary factor responsible for the transitory fluctuation of insurance premiums while the supply shock explains the preponderance of insurance premiums’ permanent growth in recent years. |
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| Keywords: | Property insurance Speculative funds Risks China |
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