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Insurance Stock Returns Sensitivity to Changes in the Default Spread
Arthur J. Young
The Journal of Finance Issues
Default spreads between corporate bonds and government bonds proxy the systematic risk of default. Using insurance monthly stock returns covering a period from 2000 through 2009, this paper investigates empirically the relationship between insurance company stock returns and default spreads. We find evidence of stock return sensitivity to changes in the default spread. The results are consistent for property- liability and life-health insurance companies.