Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/181754
Authors: 
Girardi, Giulio
Hanley, Kathleen Weiss
Nikolova, Stanislava
Pelizzon, Loriana
Getmansky, Mila
Year of Publication: 
2018
Series/Report no.: 
SAFE Working Paper 224
Abstract: 
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 magnified 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.
Subjects: 
Interconnectedness
Asset Liquidation
Similarity
Financial Stability
Insurance Companies
SIFI
JEL: 
G11
G18
G2
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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