PhD Thesis Defence, Finance
Congratulations to Dr Sylvain Catherine who successfully defended his thesis on February 14, 2019. Sylvain joined The Wharton School, University of Pennsylvania (USA) as Assistant Professor.
Thesis Topic: Essays in Finance
Supervisor: Professor Denis Gromb, HEC Paris
Co-supervisor: Professor David Thesmar, MIT (USA)
The three chapters of this thesis study households’ financial decisions over the lifecycle. The first chapter focuses on the decision to become an entrepreneur, the second on the choice to invest in stock market and the third on the value of pension entitlements.
In the first chapter, I use French administrative data on job-creating entrepreneurs to estimate a life-cycle model in which risk-averse individuals can start businesses and return to paid employment. I find that unobserved benefits represent 6,100 euros per year, summing up to 67,000 over the average entrepreneurial spell. The option to return to paid employment is worth 82,000 euros to new entrepreneurs.
In the second chapter, I estimate a life-cycle model of portfolio choices that incorporates the relationship between stock market returns and the skewness of idiosyncratic income shocks. The cyclicality of skewness can explain low stock market participation among young households with modest financial wealth and why the equity share of participants slightly increases until retirement.
In the third chapter, I calibrate a life-cycle model in which the stock and labor markets are cointegrated and Social Security benefits are wage-indexed. I find that the certainty equivalent of Social Security for working households is 46% lower than the sum of future cash flows discounted at the risk-free rate and negative for young households. At the national scale, the risk-adjusted value of Social Security entitlements is 19.6 trillion dollars, which is 37% lower than the unadjusted value of 31 trillion dollars.