Real-World Index Annuity Returns

VanderPal, Geoffrey; Marrion, Jack; Babbel, David F.
March 2011
Journal of Financial Planning;Mar2011, Vol. 24 Issue 3, p50
Academic Journal
This paper offers the first empirical exploration of fixed indexed annuity (FIA) returns based on actual contracts that were sold and actual interest that was credited. FIA5 are designed to have limited downside returns associated with declining markets, and achieve respectable returns in more robust equity markets. Studies that have criticized FIAs are usually based on hypothesized crediting rate formulae, constant participation rates and caps, and unrealistic simulations of stock market and interest rate behavior. When actual policy data are used, the conclusions change. The returns of real-world index annuities analyzed in this paper outperformed the S&P 500 Index over 67 percent of the time, and outperformed a 50/50 mix of one-year Treasury bills and the S&P 500 79 percent of the time. Our study is exploratory, because although it is based on actual contracts and actual crediting rates, our policy data set is neither randomly selected nor comprehensive based upon data provided by 15 FIA carriers.


Related Articles

  • Czech Republic: Further Treasury Yield Narrowing Likely.  // Emerging Markets Monitor;12/1/2008, Vol. 14 Issue 33, p16 

    An outlook for the Czech five-year treasury yield for 2009 is presented. It expects further contraction of the yield to 3.90%. A key factor driving down yields is continued monetary easing. Also expected is an additional 125 basis points (bps) in Czech National Bank (CNB) rate cuts by the end of...

  • Aspects of Insurance, Intermediation and Finance. Brennan, Michael J. // GENEVA Papers on Risk & Insurance - Theory;Jun1993, Vol. 18 Issue 1, p7 

    This paper is concerned with the role of the insurance company as a financial intermediary which offers securities to uninformed retail investors. The search costs of retail investors cause the demand for the securities offered by intermediaries to be inelastic, making possible an intermediary...

  • ŽEMOS PALŪKANŲ NORMOS - ESAMOS IR LAUKIAMOS. Martirosianienė, Lina // Science & Studies of Accounting & Finance: Problems & Perspectiv;2012, Vol. 1 Issue 8, p154 

    The interest rate plays an important role in the economies. It's like a self-regulator of capital allocation. Interest rate changes is a complex mechanism: 1) the economic downturn in the demand for credit decreases and this reduces the cost of credit, 2) economic recession increases credit...

  • The Monetary Origins of Asymmetric Information in International Equity Markets. Bauer, Gregory H.; Vega, Clara // Working Papers -- U.S. Federal Reserve Board's International Fin;2006, p1 

    Existing studies using low-frequency data have found that macroeconomic shocks contribute little to international stock market covariation. However, these papers have not accounted for the presence of asymmetric information where sophisticated investors generate private information about the...

  • The stock market and investment in the small and open Norwegian economy. Gjerde, �ystein; Knivsfl�, Kjell Henry; S�ttem, Frode // Empirical Economics;2001, Vol. 26 Issue 3, p565 

    The relationship between the stock market and investment is analyzed by utilizing a multivariate vector autoregressive model, which also includes fundamentals represented by production and the bank interest rate. Two important results appear on the basis of data from the small, open economy of...

  • Simon Murphy: The critical issues for UK equities after interest rates. Murphy, Simon // Money Marketing (Online Edition);9/25/2014, p33 

    The article presents the author's views on the outlook of equity market in Great Britain for 2014-2015. He says that 2014 has not been a very good year British equity investors. He says that while the global economy is showing signs of recovery, returns in equity market are declining. However,...

  • As the world turns. Walsh, Max // Bulletin with Newsweek;7/16/2002, Vol. 120 Issue 6333, p31 

    Reports on the monetary policies of major nations of the world. Reasons behind several countries' inability to raise interest rates; Factors that influence the status of major stock markets around the world; Correlation between monetary policy and earnings status.

  • US on another path. Nicholson, Colin // BRW;12/4/2003, Vol. 25 Issue 47, p76 

    Assesses the Australian and the U.S. stock markets. U.S. investors' uncertainty about the outlook going into 2004; Interest rates; Opportunity to use monetary policy to boost the economy and create jobs; Interest rate cycles in Australia; Performance of companies listed on the Australian stock...

  • The impact of sovereign rating changes and financial contagion on stock market returns: Evidence from five Asian countries. Li, Huimin; Jeon, Bang Nam; Cho, Seong-Yeon; Chiang, Thomas C. // Global Finance Journal;Aug2008, Vol. 19 Issue 1, p46 

    Abstract: This paper investigates the significance of changes in foreign currency sovereign credit ratings for both domestic and cross-country stock market returns of five Asian countries during the period from January 1990 to March 2003. Using the changes in sovereign credit ratings announced...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics