The Effectiveness of Debt Insurance as a Valid Signal of Bond Quality: Comment; Reply

An attempt is made to disentangle the definition of signaling proposed by Hsueh and Liu (1990) from that commonly asssociated with equilibrium configurations in insurance markets with asymmetric information. Puelz argues that their findings are not inconsistent with a signaling equilibrium configura...

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Bibliographic Details
Published in:The Journal of risk and insurance 1992-09, Vol.59 (3), p.499
Main Authors: Puelz, Robert, Hsueh, L Paul, Liu, Y Angela
Format: Article
Language:English
Subjects:
Debt
Insurance
Municipal bonds
Quality
Studies
Theory
Online Access:Get full text
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Summary:An attempt is made to disentangle the definition of signaling proposed by Hsueh and Liu (1990) from that commonly asssociated with equilibrium configurations in insurance markets with asymmetric information. Puelz argues that their findings are not inconsistent with a signaling equilibrium configuration and suggests a methodology to explore this phenomenon more precisely. Hsueh and Liu address the concerns raised by Puelz and provide further analysis in support of their findings. They stand by their conclusion that complete debt insurance coverage in the market should not be viewed as a valid signal of bond quality.
ISSN:0022-4367
1539-6975