Articles scientifiques

Ambiguity Aversion and Household Choice Puzzles: Empirical Evidence


Journal of Financial Economics

mars 2016, vol. 119, pp.559-577

Départements : Finance, GREGHEC (CNRS)

Mots clés : Ambiguity aversion; Stock market participation; Household portfolio puzzles; Home-bias; Own-company stock puzzle; Portfolio under-diversification; Household finance; Financial literacy

We test the relation between ambiguity aversion and five household portfolio choice puz- zles: nonparticipation in equities, low allocations to equity, home-bias, own-company stock ownership, and portfolio under-diversification. In a representative US household survey, we measure ambiguity preferences using custom-designed questions based on Ellsberg urns. As theory predicts, ambiguity aversion is negatively associated with stock market partic- ipation, the fraction of financial assets in stocks, and foreign stock ownership, but it is positively related to own-company stock ownership. Conditional on stock ownership, am- biguity aversion is related to portfolio under-diversification, and during the financial crisis, ambiguity-averse respondents were more likely to sell stocks

Are retail traders compensated for providing liquidity?


Journal of Financial Economics

avril 2016, vol. 120, n°1, pp.146-168

Départements : Finance

Mots clés : Liquidity, Retail investors, Crisis

This paper examines the extent to which individual investors provide liquidity to the stock market and whether they are compensated for doing so. We show that the ability of aggregate retail order imbalances, contrarian in nature, to predict short-term future returns is significantly enhanced during times of market stress, when market liquidity provisions decline. While a weekly rebalanced portfolio long in stocks purchased and short in stocks sold by retail investors delivers 19% annualized excess returns over a four-factor model from 2002 to 2010, it delivers up to 40% annualized returns in periods of high uncertainty. Despite this high aggregate performance, individual investors do not reap the rewards from liquidity provision because they experience a negative return on the day of their trade and they reverse their trades long after the excess returns from liquidity provision are dissipated. During the financial crisis, French active retail stock traders stepped up to the plate,increased stock holdings, and provided liquidity. In contrast, mutual fund investors fled from delegation by selling their mutual funds

Debt decisions in deregulated industries


Journal of Corporate Finance: Contracting, Governance and Organization

février 2016, vol. 36, pp.230-254

Départements : Finance, GREGHEC (CNRS)

Mots clés : Debt decisions, Debt maturity, Public and private debt issues, Deregulation

Deregulation significantly affects firms’ debt decisions. Prior to deregulation, regulated firms depend more on long-term and public debt but reduce this dependence considerably during deregulation. Cross-sectional analysis shows that the lower use of long-term and public debt results from changing firm sensitivities to determinants of debt decisions triggered by deregulation. Consistent with credit and liquidity risk theories of debt maturity, the concave relation between firm quality and debt maturity is attenuated among regulated firms. Inconsistent with these theories, the convex relation between firm quality and public debt issues exists only among regulated firms. I find limited support for other theories

Fed Funds Futures Variance Futures


Quantitative Finance

2016, vol. 16, n°9, pp.1413-1422

Départements : Finance

Mots clés : fed funds futures, Funding costs, Unsecured interbank money market

We develop a novel contract design, the fed funds futures (FFF) variance futures, which reflects the expected realized basis point variance of an underlying FFF rate. The valuation of short-term FFF variance futures is completely model-independent in a general setting that includes the cases where the underlying FFF rate exhibits jumps and where the realized variance is computed by sampling the FFF rate discretely. The valuation of longer-term FFF variance futures is subject to an approximation error which we quantify and show is negligible. We also provide an illustrative example of the practical valuation and use of the FFF variance futures contract

Information asymmetry, the cost of debt, and credit events: Evidence from quasi-random analyst disappearances


Journal of Corporate Finance: Contracting, Governance and Organization

aout 2016, vol. 39, pp.295-311

Départements : Finance, GREGHEC (CNRS)

Mots clés : Information asymmetry, Cost of debt, Default, Bankruptcy, Natural experiment, Matching estimators, Difference-in-differences, Equity research analysts, Creditors

We hypothesize that greater information asymmetry causes greater losses to debtholders. To test this, we identify exogenous increases in information asymmetry using the loss of an analyst that results from broker closures and broker mergers. We find that the loss of an analyst causes the cost of debt to increase by 25 basis points for treatment firms compared to control firms, and the rate of credit events (e.g., defaults) is roughly 100–150% higher. These results are driven by firms that are more sensitive to changes in information (e.g., less analyst coverage). The evidence is broadly consistent with both financing and monitoring channels, although only a financing channel explains the impact of the loss of an analyst on firms' cost of debt