Work detail

Impact of the low yield environment on banks and insurers: Evidence from equity prices

Author: Mgr. Filip Juřena
Year: 2017 - summer
Leaders: doc. PhDr. Ing. Ing. Petr Jakubík Ph.D. Ph.D.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 93
Awards and prizes:
Link:
Abstract: Using static and dynamic panel data analysis, we examine how interest rates
influenced equity prices of European banks and insurance companies between
2006 and 2015. Identification and quantification of effects of the low yield
environment, which is a consequence of decreasing interest rates, are crucial
for regulators and policy makers. Our static and dynamic models show that
decreasing short-term interest rates had a negative impact both on banks and
insurers. In this thesis, dynamic models are estimated by means of the BlundellBond
system GMM estimator and we consider their results superior to the
results of static models because all underlying assumptions of the dynamic
models are met here. Results obtained by employing the Blundell-Bond system
GMM estimator suggest that life insurers were effected more than banks, while
banks were effected more than non-life insurers. In case of a 1 percentage point
decrease in short-term interest rates, equity prices of life insurers are estimated
to decrease on average by 18 %, equity prices of banks by 8 %, and equity
prices of non-life insurers by 3 %.

Partners

ČSOB
Deloitte
McKinsey & Company

Sponsors

CRIF