Économie et Statistique n° 472-473Wealth and savings behaviour - The input of the 2010 Wealth survey: savings behaviour, inequalities, retirement and lifecycle, behaviour when faced with risk
The portfolio choices of investors in the Stock Exchange cycle and the lifecycle
Do investors holding risky financial securities tend to invest against the trend of the Stock Exchange? Do they reduce their exposure to risk with age and when they get closer to retirement? The data from a leading French insurance company recording the subscription of Madelin policies between 2002 and 2009 put forward some answers. Investors can place their savings in two kinds of investment: monetary securities which are practically risk-free, and unit-linked funds representing the shares of UCITS invested in risky securities. The proportion of capital invested in unit-linked products proves to be sensitive to the state of the Stock Exchange only upon subscription of the contract. This is followed by a marked inertia in the choices of portfolio, with investors modifying the proportion initially chosen only very rarely. The marked procyclical nature of investment choices appears to be explained by an extrapolation of the recent perfromances of the Stock Exchange. Thus, new subscribers held a minimum amount of risky assets in 2004 at the beginning of a four year bullish phase, and a maximum amount in 2008 at the start of the bearish trend related to the financial crisis. The risky proportion declines regularly with age, taking account of the time effects and without verifying the generation effects. The profile by age also declines in the opposite configuration (with generation effects and without time effects) but the drop is less marked because it is the result of two opposing mechanisms: with age, the number of investors investing in risky assets tends to increase whereas, subject to investment, the risky proportion decreases. Thus between the ages of 40 and 60, the probability of holding unit-linked products increases by approximately 12 points whereas the proportion invested in unit-linked products, provided that a positive proportion is held, decreases with age by approximately 6 points, leaving the subsistence of a financial risk at retirement age approach.