A Study of Fire and Casualty Stock Price Determination with Some Price Movement Implications

Abstract

Fire and casualty insurance stocks are an important segment of the securities market. Best's reported that in 1962 there were more than 800 stock companies with combined assets of $25 billion in the United States.' However, despite their importance little quantitative work has been published to suggest what factors the market considers most important in the determination of fire and casualty stock prices. Most of the available literature is concerned primarily with reporting operating results or with illustrating that true earnings or asset valuation must reflect an adjustment in the statutory figures for equity in the unearned premium reserve. None of the literature attempts to determine quantitatively which of the many financial criteria most influences the level of individual stock prices. Yet, requisite to an effective estimate of stock worth is the knowledge of those financial criteria that are given greatest consideration by the many investors who together make up the fire and casualty stock market. Therefore, it is the purpose of this