In Search of Habitat

Xuanjuan Chen; Zhenzhen Sun; Tong Yao; Tong Yu

doi:10.1093/rapstu/raac018

The Review of Asset Pricing Studies Vol. 13 No. 2 2023

In Search of Habitat

Xuanjuan Chen¹; Zhenzhen Sun²; Tong Yao³; Tong Yu ⁴

¹ School of Finance, Shanghai University of Finance and Economics , China · ² Charlton College of Business, University of Massachusetts Dartmouth , USA · ³ Tippie College of Business, University of Iowa , USA · ⁴ Lindner College of Business, University of Cincinnati , USA

Abstract

We perform portfolio-level analyses to understand insurance firms’ preferred habitat behavior in the government bond market. Based on portfolio durations and portfolio weights across maturities, we find that interest rate risk exposures of insurers’ portfolios are related to their operating liabilities and financing constraints. We show that this habitat behavior significantly affects bond pricing. During the “quantitative easing” era, bond purchases by the Federal Reserve have a larger impact on the yields of Treasury bonds with a higher habitat demand.

DOI: 10.1093/rapstu/raac018
Volume: 13
Issue: 2
Pages: 266-306
Language: en
Sources: crossref bibtex:phds-export.bib openalex

In Search of Habitat

Abstract

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