Economic indicators and their effect on the stock performance of insurance companies in Kuwait

Abstract

This study investigates the effect of macroeconomic variables on the stock prices of insurance companies in Kuwait using quarterly data from 2014 to 2023. The analysis incorporates key macroeconomic indicators, including Gross Domestic Product (GDP), Consumer Price Index (CPI), and interest rates, to explore their relationship with insurance stock performance. The results reveal that GDP, CPI, and interest rates positively and significantly influence stock prices, with GDP emerging as the strongest determinant, underscoring the sector’s reliance on economic growth. CPI and interest rates also demonstrate meaningful impacts, reflecting inflationary and investment income effects on stock valuations. These findings have important implications for policymakers, investors, and industry stakeholders. Policymakers are encouraged to foster economic stability and growth to support the insurance sector, while investors can benefit from integrating macroeconomic trends into their decision-making processes. Insurance companies should adopt strategies to mitigate risks and capitalize on favorable economic conditions. This research contributes to the literature by providing empirical evidence on the interplay between macroeconomic factors and insurance stock prices in an oil-dependent economy, with future research opportunities to explore non-linear relationships, additional variables, or cross-country comparisons.