Household portfolio choices over the life cycle.

Summary The increasing complexity of financial products offered to households and recent financial innovations have revealed the vulnerability and difficulty of households to make appropriate decisions. In order to better understand their behavior, this thesis focuses on households' portfolio choices over their life cycle. Four chapters have been developed for this purpose. Wealth advisors suggest that households invest in risky assets as they approach retirement. Chapter 1 sheds light on this recommendation. We show that the investment profile based on this recommendation is not preferable to a constant investment profile because of the sensitivity of their performance to the markets and investment period. This led us to analyze the relationship between financial choices and portfolio inertia in chapter 2. We find that the share of risky assets is sensitive to stock market conditions but mainly to the opening date of the contract. Households most often maintain their investment decision throughout the life of the contract. On the other hand, in the event of major stock market fluctuations, they readjust their portfolios. They are more sensitive to stock market declines than to increases. Portfolio inertia is influenced by the ˆâge of the saver and the opening date of the contract. We further investigate the result of the effect of age on inertia. Chapter 3 thus studies how the share of risky assets varies with age. We show that this share declines steadily. Finally, Chapter 4 analyzes the participation of households in the financial market and the impact of the economic environment on portfolio choices. We show that institutional factors encourage investment in real estate at the expense of risky assets. Household portfolio choices are also influenced by demographic and social factors.