Why does household demand for shares decline during the crisis? The French case

The economic crisis has impacted French savers, now less willing to take risks in their financial decisions. What is the explanation behind these changes? According to "standard" theory, savers' investments rest on three fundamental determinants: present resources; expected risk and returns on assets, as well as expectations on earned income; and lastly, individual preferences, especially risk preferences. We use French data from the Pater panel, a survey collected in 2007 and again in 2009, 2011 and 2014. We show that it is the downward adjustment in the expected return from shares and negative impacts on current resources that help explain why the French are investing less and less in risky assets. Risk preferences, however, have remained stable. In contrast, the resurgence in optimism shown by savers in 2014 did not play out in reality, as the number of shareholders has continued to decrease. A new puzzle to be solved?