Does mortality improvement increase equity risk premiums? A risk perception perspective
Journal
Journal of Empirical Finance
Journal Volume
22
Pages
67-77
Date Issued
2013
Author(s)
Abstract
Using data for G7 countries over the period from 1950 to 2007, this paper finds that an unexpected shock to the mortality rate is significantly negatively correlated with the equity premium. A one basis point unexpected negative shock to the mortality rate increases both the one-year and five-year equity premiums by 0.54% and 1.66%, respectively. We also demonstrate how financial institutions could use our findings to hedge the risk of mortality-linked securities. ? 2013 Elsevier B.V.
Subjects
Demography
Equity risk premium
Mortality risk
Risk perception
Type
journal article