The Impact of Large Portfolio Insurers on Asset Prices

  • Author(s): R. GLEN DONALDSON, HARALD UHLIG
  • Published: Apr 30, 2012
  • Pages: 1943-1955
  • DOI: 10.1111/j.1540-6261.1993.tb05135.x

ABSTRACT

We develop a simple model in which the presence of portfolio insurers in a market of risk‐averse traders leads to multiple equilibria for the pricing of financial assets and can cause an increase in volatility, including insurance‐induced price drops. We demonstrate, however, that centralized portfolio insurance firms may actually reduce, not increase, volatility, even if the existence of these firms increases the total amount of funds under insurance.

Jump to menu

Main Navigation

Search the Site / Journal

Search Keywords

Search Tips

Members' Login

Credentials

Members' Options

Site Footer

View Mobile Version