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Behavior of Canadian life annuity prices

Published online by Cambridge University Press:  21 June 2023

Narat Charupat Open the ORCID record for Narat Charupat [Opens in a new window]  and
Mark J. Kamstra
Narat Charupat*
Affiliation:
DeGroote School of Business, McMaster University, Hamilton, Canada
Mark J. Kamstra
Affiliation:
Schulich School of Business, York University, Toronto, Canada
*
Corresponding author: Narat Charupat; Email: charupat@mcmaster.ca
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Abstract

We examine the behavior of Canadian life annuity prices by measuring how quickly and fully they respond to changes in market interest rates. The price responses, though not immediate, start relatively quickly and become more complete over time. Over the whole sample period, the responses appear to be asymmetric – annuity providers generally raise prices faster when interest rates decline than reduce prices when the opposite occurs, which is disadvantageous to annuity customers. In addition, we find unusual annuity price behavior during the period of the 2008 financial crisis.

Keywords

Canadalife annuityprice responses
Type
Article
Information
Journal of Pension Economics & Finance , Volume 23 , Issue 2 , April 2024 , pp. 202 - 223
Copyright
Copyright © The Author(s), 2023. Published by Cambridge University Press

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