Preferred habitat, taxable/tax-exempt yield spreads, and cycles in property/liability insurance.: An article from: Journal of Money, Credit & Banking

This digital document is an article from Journal of Money, Credit & Banking, published by Ohio State University Press on November 1, 1992. The length of the article is 8815 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

From the supplier: Several theories seek to explain the spread between the yields on taxable and tax-exempt bonds of comparable maturity. This paper reconsiders the market segmentation theory by focusing on property and liability insurance companies (PLICs). PLICs can provide evidence on the market segmentation theory both because they are major participants in the market for longer term tax-exempt bonds and because of their industry's pronounced profit cycle, which causes wide variations in PLICs' need for tax shields. If investors have "preferred habitats" as per the market segmentation theory, their preferences should cause PLICs' purchases and sales of tax-exempts to have different impacts on taxable/tax-exempts yield spreads at different maturities. This paper finds strong evidence of market segmentation during the 1972-84 period, when the industry experienced two extremely pronounced cycles, and weaker evidence of market segmentation during the 1959-71 and 1985-89 periods. (Printed by permission of the publisher.)

Citation Details
Title: Preferred habitat, taxable/tax-exempt yield spreads, and cycles in property/liability insurance.
Author: Karlyn Mitchell
Publication:Journal of Money, Credit & Banking (Refereed)
Date: November 1, 1992
Publisher: Ohio State University Press
Volume: v24 Issue: n4 Page: p528(25)

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