Asset Pricing and Extreme Event Risk: Common Factors in ILS Fund Returns

Semir Ben Ammar (), Alexander Braun () and Martin Eling

No 1621, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: The returns of investment funds specializing in insurance-linked securities (ILS) exhibit a unique behavior. We introduce a new peril-based factor model, which explains the time-series and cross-sectional return variation. Despite a strong overall fit, we are left with significantly positive alphas for about one quarter of the funds, some of which can be attributed to beta exposures associated with non-cat-bond ILS. In addition, they are related to fund size, fund age, and performance fees. Although we do not find evidence for market timing abilities, we can rule out pure luck as the source of outperformance by controlling for false discoveries.

Keywords: Insurance-Linked Securities; Investment Funds; Factor Model; Catastrophe Bonds (search for similar items in EconPapers)
JEL-codes: G13 G22 Q54 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2016-12
New Economics Papers: this item is included in nep-ias and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1621.pdf (application/pdf)

Related works:
Journal Article: Asset pricing and extreme event risk: Common factors in ILS fund returns (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:usg:sfwpfi:2016:21

Access Statistics for this paper

More papers in Working Papers on Finance from University of St. Gallen, School of Finance Contact information at EDIRC.
Bibliographic data for series maintained by ().