These are troubled times for savers, facing a financial and economic crisis that has made the environmentmore uncertain, a macroeconomic risk threatening the future of the social security system, and also tax reforms and “activation” policies encouraging individuals to take more responsibility for their own futures. Consequently, French savers are turning even more towards safe, short-term assets (growth in savings accounts, decline in net investment in insurance savings, etc.) and real estate and away from more risky and long-term financial investments. This state of affairs is a cause of concern to some analysts, who are looking for ways to encourage households to take more risks and put more of their savings into productive investment.

Before entering into this debate, we conduct a statistical “audit” of the wealth of French and European savers. To do so, we exploit the whole range of available data: from the Comptabilité Nationale (French National Accounts) to household surveys conducted by the INSEE (“Patrimoine” surveys) and the European Central Bank (HFCS surveys). From these data, we conclude that this “equity premium puzzle” on risky financial assets is not a purely French phenomenon, but affects the whole eurozone.

We then look at the explanations for this empirical puzzle from the perspectives of orthodox and behavioural economics: reluctance to invest in the stock market comes as much from the supply side – transaction costs in the broad sense, relatively unfavourable taxation that reduces the expected return – as from the demand side – lack of financial education among savers, aversion to risks perceived as being too high, exposure to other risks (income, unemployment, family, health, housing, human capital).

On the demand side, individuals’ portfolio choices depend on three main components: their preferences (risk aversion, time preference, etc.), their more or less available or risky resources, and their expectations about return and risk vis-à-vis the stock market and labour income. The “natural” experiment created by the current financial and economic crisis provides an ideal vantage point for assessing the importance of each of these factors. The unique longitudinal data of the PATER survey allow us to study the reactions of savers during the “great recession”, to see “what has changed” in order to explain the increased timidity of investors: greater risk aversion, less resources, more pessimism? We will then be in a better position to evaluate the relevance of a number of propositions for redirecting savings towards more risky investments.

Luc Arrondel & André Masson

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