Demand For Stocks in the Crisis: France 2004-2014

In this paper, we assess how the factors explaining the holdings of stocks have evolved through the financial crisis. We rely on the data collected in surveys conducted among French households during the period 2004-2014. There are three main modes for investing in stocks: buying shares directly; purchasing them through mutual funds; and finally taking out unitlinked life insurance. Obviously, these three ways to invest in stocks do not involve the same investment behaviours since, besides the risk and return characteristics, they differ in their transaction costs, management fees and taxation. As a result, there is no a priori reason to consider that portfolio choice decisions by households on these modes of stockownership are equivalent and correspond to the same individuals' characteristics. We show that the holding of risky assets and of individual direct shares decreased during the period, and especially between 2009 and 2014. At the end of the period, the profile of direct equity holders was refocused towards profiles with greater risk tolerance. Other factors of direct stockholdings include: better education, gifts and inheritances, parents holding securities, singles, high-wealth households and high-income groups. Conditionally on holdings, the proportion of risky assets increases with risk tolerance and the holding of securities by parents. It also decreases at the end of the period. Our paper also shows that shareholders have gradually moved towards preferential ownership of shares in life insurance rather than direct share ownership, especially between 2009 and 2014. The estimation of a simultaneous model shows the specific characteristics of stockholders depending on the chosen support (direct, indirect or on life insurance): those who invest directly in stocks are richer, more educated and less risk averse; those who hold mutual funds are a little richer but more risk averse and do not appear the most educated; finally, for ownership in stocks on life insurance contracts, the position in the life cycle plays an important role as well as the social category.