DIRER Alexis

I study the allocation problem of investors who hold their portfolio until a target wealth is attained. The strategy suppresses final wealth uncertainty but creates an investment time horizon risk. I begin with a simple mean variance model transposed in the duration domain, then study a dynamic portfolio choice problem with Generalized Expected Discounted Utility preferences. Using long-term US return data, I show in the mean variance model that a large amount of time horizon risk can be diversified away by investing a significant share of equities. In the dynamic model, more impatient investors are also more averse to timing risk and invest less in equities. The equity share is downward trending with accumulated wealth relative to its target. J.E.L. codes: D8, E21.

This paper studies the optimal scoring of multiple choice tests by using standard estimation theory where obtained scores are efficient estimators of examinees' ability. The marks for wrong selections and omissions jointly minimize the mean square difference between obtained score and ability. Examinees are loss averse, ie. disproportionately weight the penalty for wrong selection in their utility function, which entails a preference for omission. With a limited number of items, it is efficient to incentivize the lowest able to omit as their answers essentially reflect noise. The shorter the test, the stronger the incentives to omit. Loss aversion improves estimators efficiency by inducing more omission, which reduces the need to bias the marks to foster omission. The model also sheds new lights on the statistical properties of two widely used scoring methods: number right and formula scoring. J.E.L. codes: A200, C930, D800.

A focused definition of present bias is proposed which takes preferences as primitives. A present biased individual over-weights immediate costs and benefits relative to those occurring at any point in the future. The definition allows to sort out previous confounds, such as decreasing impatience, choice reversal or short-term impatience. It intuitively connects to usual utility representations of present bias like the quasi-hyperbolic model of Laibson (1997) or the fixed cost model of Benhabib, Bisin and Schotter (2010). J.E.L. codes: D8, E21.

A novel theory of time discounting is proposed in which future consumption is less valuable than present consumption due to waiting costs. Waiting is intermittent as consumer's attention can be distracted away from future gratifications. The model unifies several properties of intertemporal preference like present bias, decreasing impatience or sub-additive discounting. A quantitative puzzle is presented, supported by preliminary experimental evidence, which shows how impatience over short delays may translate into excessive impatience over long delays. The wait-based model offers a solution to the puzzle, contrary to usual models of discounting. J.E.L. codes: D8, E21.

A focused definition of present bias is proposed which takes preferences as primitives. A present biased individual over-weights immediate costs and benefits relative to those occurring at any point in the future. The definition allows to sort out previous confounds, such as decreasing impatience, choice reversal or short-term impatience. It intuitively connects to usual utility representations of present bias like the quasi-hyperbolic model of Laibson (1997) or the fixed cost model of Benhabib, Bisin and Schotter (2010). J.E.L. codes: D8, E21.

This paper studies the optimal scoring of multiple choice tests by using standard estimation theory where obtained scores are efficient estimators of examinees' ability. The marks for wrong selections and omissions jointly minimize the mean square difference between obtained score and ability. Examinees are loss averse, ie. disproportionately weight the penalty for wrong selection in their utility function, which entails a preference for omission. With a limited number of items, it is efficient to incentivize the lowest able to omit as their answers essentially reflect noise. The shorter the test, the stronger the incentives to omit. Loss aversion improves estimators efficiency by inducing more omission, which reduces the need to bias the marks to foster omission. The model also sheds new lights on the statistical properties of two widely used scoring methods: number right and formula scoring. J.E.L. codes: A200, C930, D800.

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This thesis studies survivors' pensions in France, focusing on the "implicit" patrimonial dimension of pension rights. Indeed, pension rights constitute a component of the "wealth" of the insured, understood as an "implicit" saving, also called the asset equivalent of pension rights (EPDR). After having analyzed, in chapter 1, the great diversity of rules for opening and drawing survivors' pensions between schemes, as well as the different underlying logic of survivors' pensions between the private and public sectors, we show, in chapter 2, that the EPDR evaluated is greater, on average, in public sector schemes because of the greater qualifications of deceased spouses in these schemes and the more advantageous conditions for liquidating pensions. Moreover, the inequality in the distribution of this "pension wealth" is less than that generally observed for real household wealth, but is broken down differently according to the former sector of activity of the deceased spouse. Thus, several factors, other than the survivor's pension, would explain the level of the EPDR. The analysis, in Chapter 3, of the impact on the EPDR of the increase in the insurance period during the 1993 and 2003 reforms shows a significant reduction in the EPDR of pensioners whose deceased spouse had validated at least 60 quarters of contributions, but was affected by the measure. Finally, in Chapter 4, we show that the reversionary provisions allow widows and widowers on average to maintain their standard of living prior to the death of their spouse, although there are nuances depending on whether the deceased was a former executive in the private sector, a former non-executive in the private sector or a former civil servant.

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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.

Six papers presented at the 31st Days of Monetary and Financial Economics at the Institute of Political Studies in Lyon on June 19-20, 2014 have been selected for publication in this issue of the French Journal of Economics. These days were organized by Antoine Parent in charge of the local committee and by Alexis Direr and Jean-Bernard Chatelain, in charge of the program committee. This is the annual event of the Groupement de recherche européen (GDRE) en monnaie, banque et finance, funded by the CNRS. About 90 papers were presented in parallel sessions. The roundtable discussion organized by Andy Mullineux at these days has already been published in the 2014/3 issue of the Revue française d'économie (Mullineux [2014]), under the title "Have we made banks 'good'?" This panel discusses the consequences of recent changes in banking regulation on the reduction of risk-taking by banks, on the improvement of capital and credit allocation, on the reduction of rents in the banking sector, and on the ethics of the banking professions.

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For several years, households have been facing a process of increasing financial responsibility. In this context, do individuals have sufficient financial skills to make informed decisions about financial planning, wealth accumulation, debt and retirement? What solutions can be considered to mitigate the negative effects of lack of financial literacy? This thesis contributes to answering these two questions through an assessment of financial education in France and its links to financial behavior and through the study of the determinants of financial education over the long term and potential solutions to the lack of financial education. I show that financial education levels in France are within the international average with heterogeneous levels between population subgroups. I also document the fact that financial education can influence financial behavior, notably by promoting participation in financial markets and long-term financial planning. I also question the role of financial advisors as an alternative to financial education and show that they are not a substitute for it. Finally, I establish that late life education is significantly related to certain educational and cognitive factors in early life but also to financial fragility over the life cycle. This last result has important implications for the development of targeted financial education programs.

This article proposes an equilibrium approach to lottery markets in which a firm designs an optimal lottery to rank-dependent expected utility (RDU) consumers. We show that a finite number of prizes cannot be optimal, unless implausible utility and probability weighting functions are assumed. We then investigate the conditions under which a probability density function can be optimal. With standard RDU preferences, this implies a discrete probability on the ticket price, and a continuous probability on prizes afterwards. Under some preferences consistent with experimental literature, the optimal lottery follows a power-law distribution, with a plausibly extremely high degree of prize skewness.

Do households holding risky financial securities tend to invest in the stock market, buying at the top and selling at the bottom? Do they reduce their risk exposure with age and especially when approaching retirement? We answer these questions using data on retirement savings contracts from a large French insurer over the period 2002 to 2009. Subscribers can invest their savings in two types of investment vehicles: a euro fund composed primarily of money market securities with almost no risk, and unit-linked funds representing UCITS shares invested in risky securities. We show that the share of capital invested in unit-linked funds is sensitive to market conditions, but mainly at the date of subscription. Once the initial share has been selected, inertia of portfolio choice is observed as investors rarely revise their position subsequently. We observe a steep procyclicality of investment choices which can be explained by extrapolation of recent market performance. New subscribers buy risky assets when the stock market rises and stop buying them when it drops. This leads them to hold a minimum share of risky assets in 2004, a beginning of a 4-year rising phase and a maximum share in 2008 at the beginning of a fall market.We also find that the risky share declines with age once time effects are controlled for and cohort effects are excluded. The age profile also declines in the reverse configuration (taking into account cohort effects and excluding time effects) but the decline is less pronounced. After a discussion of the plausibility of the different effects, we estimate a probability of unit-linked detention which decreases by about 12 percentage points with age between ages 40 and 60, and a conditional equity share which decreases by about 6 percentage points with age between 40 and 60 years. This decrease is too small to bring the invested share to zero when approaching retirement.

Do investors in risky financial securities tend to invest against the grain in the stock market, buying at the highs and selling at the lows? Do they reduce their risk exposure as they age and especially as they approach retirement? We answer these two questions using data from a major French insurer listing Madelin contract subscriptions between 2002 and 2009. Subscribers can invest their savings in two types of funds: a euro fund composed essentially of money market securities that are virtually risk-free, and unit-linked funds representing mutual fund shares invested in securities with risky returns. We show that the part of the capital invested in units of account is sensitive to the stock market situation, but essentially to the date of subscription of the contract. Once the initial share has been selected, a strong inertia of portfolio choices is observed, since investors very rarely change the decision they made at the beginning of the contract. We observe a strong procyclicality of investment choices which is explained by an extrapolation of recent stock market performance. New subscribers buy risky assets when the stock market rises and stop buying them when it falls. This leads them to hold a minimum share of risky assets in 2004, at the beginning of a four-year bull market, and a maximum share in 2008, at the beginning of the stock market decline due to the financial crisis. We also find that the risky share declines steadily with age once we control for time effects and exclude generation effects. The profile by age also declines in the opposite configuration (taking into account generation effects and excluding time effects) but the decline is less pronounced. It is in fact the product of two phenomena. First, the number of savers investing in risky assets tends to increase with age. On the other hand, conditional on investing, the risky share decreases with age. After a discussion of the plausibility of the different effects, we estimate a probability of holding units of account that increases with age by about 12 percentage points between the ages of 40 and 60, and a share invested in units of account conditional on holding a positive share that decreases with age by about 6 percentage points between 40 and 60. The decrease is too small to bring the invested portion to zero as retirement approaches.

This article investigates the degree of efficiency of the European Football online betting market by using odds quoted by 12 bookmakers on 21 European championships over 11 years. We show that systematically picking out odds inferior to a threshold delivers a rate of return of 4.45% if best odds are selected across bookmakers and 2.78% if mean odds are used. This amounts to backing overwhelmingly favourites whose probability of winning exceeds 90%. Our results only exploit information contained in odds, are robust to the use of real-time data and different sample periods and hold under risk neutrality and expected utility preferences for realistic degrees of risk aversion. Transaction costs reduce profitability but only for small stake bets.

The obsession with economic growth dominates the political discourse. The main determinant of long-term growth put forward by endogenous growth theories is innovation, but the institutional environment of economic activity is also a key element in explaining the pace of growth, and in particular, within this environment, competition, whose role is much debated. The purpose of this thesis is to study some dimensions of growth, its determinants and the policies that seek to foster it, in particular innovation and competition. The first part focuses on two types of policies that encourage innovation. The first is direct public support, through a study of the impact of the research tax credit (chapter 1). The second policy examined is the evolution of the legal framework for innovation (chapter 2). The theoretical model presented intends to take into account the new practices of intellectual property law. The second part deals with the institutional environment in the broad sense, and in particular with competition. It opens with an international comparison of the level of competition between France and several European countries in various sectors, using an econometric method based on growth equations (chapter 3). Two sectors are then analyzed in detail: the agri-food sector, whose equilibrium has been largely modified to the benefit of supermarkets in recent years (chapter 4), and the hotel-cafe-restaurant sector (chapter 5).

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The research conducted in this thesis proposes a contribution to the analysis of risk in the French automobile insurance market. Three new axes are presented: the first axis is based on a theoretical framework of the automobile insurance market. An original model of double asymmetric information is presented. The main result is the existence of two kinds of equilibrium contracts: a separating contract and a mixing contract. The second point is related to the consideration of past claims experience in the study of the risk-coverage relationship. Bivariate and trivariate models are applied for this purpose. This shows that the hypothesis of information asymmetry is verified. Finally, the third issue raised in this thesis concerns the application of the surcharge to young drivers. We show through econometric modelling of claims experience that the legitimacy of insurers to almost systematically offer higher rates to young drivers than to experienced drivers is not always verified.

In this paper, we analyze the effect of firms' access to credit on their actual decisions and fluctuations. The presence of financial imperfections prevents agents from smoothing their expenditures over time or from one state of nature to another. We focus on the fluctuations of the bankruptcy rate in the economy, on their origins and their allocative consequences. The modeling we use allows us to shed light on the degree of credit risk exposure of banks, which has been a major feature of banking crises in developed countries over the past fifteen years. The risk of bank assets is then related to other macroeconomic variables and to the degree of interbank competition. We show that the decline in the interest rate tends to reduce the incentive of banks to select efficient projects and that competition can have adverse effects on aggregate risk. The evolution of credit risk is also the result of borrowers' behavior. In a second step, we analyze the incentive of firms to finance themselves by credit in an imperfect informational universe. We show that the presence of inter-firm credit is a significant factor of the bankruptcy rate in the economy because of the emergence of a system risk. We then examine the extent to which inter-firm financial connections propagate aggregate shocks. Finally, we study the effect of information asymmetries on the investment behavior of firms when they cannot diversify their financial assets in order to reduce their risk. We show that credit financing, although representing an optimal mode of financing in such an environment, does not allow to dampen economic shocks.