Articles scientifiques

The Dynamics of Financially Constrained Arbitrage


The Journal of Finance

A paraître

Départements : Finance, GREGHEC (CNRS)

Mots clés : Arbitrage, financial constraints, market segmentation, liquidity, contagion

We develop a model in which financially constrained arbitrageurs exploit price discrepancies across segmented markets. We show that the dynamics of arbitrage capital are self-correcting: following a shock that depletes capital, returns increase, and this allows capital to be gradually replenished. Spreads increase more for trades with volatile fundamentals or more time to convergence. Arbitrageurs cut their positions more in those trades, except when volatility concerns the hedgeable component. Financial constraints yield a positive cross-sectional relationship between spreads/returns and betas with respect to arbitrage capital. Diversification of arbitrageurs across markets induces contagion, but generally lowers arbitrageurs’ risk and price volatility

The effects of investment bank rankings: Evidence from M&A league tables


Review of Finance

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Départements : Finance, GREGHEC (CNRS)

Who are the value and growth investors?


The Journal of Finance

A paraître

Départements : Finance

Mots clés : Asset pricing, value premium, household finance, portfolio allocation, human capital, factor-based investing

This paper investigates value and growth investing in a large administrative panel of Swedish residents. We show that over the life-cycle, households progressively shift from growth to value as they become older and their balance sheets improve. Furthermore, investors with high human capital and high exposure to macroeconomic risk tilt their portfolios away from value. While several behavioral biases seem evident in the data, the patterns we uncover are overall remarkably consistent with the portfolio implications of risk-based theories of the value premium

Zero-sum revision games


Games and Economic Behavior

A paraître

Départements : Finance, GREGHEC (CNRS), Economie et Sciences de la décision

Mots clés : Revision games, Zero-sum games, Deadline effect

In zero-sum asynchronous revision games, players revise their actions only at exogenous random times. Players' revision times follow Poisson processes, independent across players. Payoffs are obtained only at the deadline by implementing the last prepared actions in the “component game”. We characterize the value of this game as the unique solution of an ordinary differential equation and show it is continuous in all parameters. As the duration of the game increases, the limit revision value does not depend on the initial position and is included between the min-max and max-min of the component game. We characterize the equilibrium for 2×2 games. When the component game min-max and max-min differ, the revision game equilibrium have a wait-and-wrestle structure: far form the deadline, players stay put at sur-place action profile, close to the deadline, they take best responses to the action of the opponent

A Model of Trading in the Art Market


American Economic Review

mars 2018, vol. 108, n°3, pp.744-774

Départements : Finance, GREGHEC (CNRS)

Mots clés : art; auctions; endogenous trading; price indexes; private values; returns

We present an infinite-horizon model of endogenous trading in the art auction market. Agents make purchase and sale decisions based on the relative magnitude of their private use value in each period. Our model generates endogenous cross-sectional and time-series patterns in investment outcomes. Average returns and buy-in probabilities are negatively correlated with the time between purchase and resale (attempt). Idiosyncratic risk does not converge to zero as the holding period shrinks. Prices and auction volume increase during expansions. Our model finds empirical support in auction data and has implications for selection biases in observed prices and transaction-based price indexes