Finance

The mission, vision and objectives of the Finance area

The finance team’s research aims at a better understanding of the functioning of capital markets. Members of the team study the design of financial markets as well as the behavior of market participants from firms that need to raise capital to intermediaries between investors and firms (banks, venture capital funds, mutual funds) to households who borrow and invest. This research targets top scientific journals (Journal of Finance, Review of Financial Studies, Journal of Financial Economics) that can make an impact in the scientific community. Our mission is also to transmit and transpose the conclusions of this research into teaching and program design, as well as informing corporate practices and public policies.

Research topics

The finance team’s research is structured around four different themes described below. These descriptions provide an overview of each research topic as well more precise examples of research projects conducted by members of the team. Up-to-date information on on-going projects can be found on the researcher’s personal websites.

Market microstructure

• Christophe Bisière, Fany Declerck, Alexander Guembel, Sophie Moinas.

Market microstructure studies how the design of financial markets (trading rules, transparency, competition between venues) affect the ability of participants to share risk (liquidity), to aggregate information (informational efficiency) and to allocate capital. For example, Sophie Moinas and Fany Declerck have worked on speed in electronic order-book markets. They investigate how traders’ access to high-speed market connections that allow faster trading affects market makers’ ability to provide liquidity without exposing themselves to informed trading. Alexander Guembel works on the aggregation of information into stock prices and how it affects real decisions such as corporate investment or regulatory interventions.

Green Finance 

• Milo Bianchi, Sophie Moinas, Sébastien Pouget.

Green finance studies the mechanisms through which investors’ environmental concerns affect corporate policy. The transmission channels include firms’ cost of capital if investors are willing to pay more for securities issued by environmentally friendlier companies, as well as active intervention through corporate governance mechanisms (acquisitions, shareholder proposals, proxy fights). For example, Sebastien Pouget works on investors’ perceptions of firms’ climate-related actions by examining climate-related patents. His research suggests a causal link between financial markets and firms’ policies:  firms that  investors perceive as more environmentally friendly do get access to cheaper capital and are more likely to develop climate-related technologies. Milo Bianchi’s research suggests that investors’ preferences for green firms are shaped by their personal experiences of environmental damage.

Financial intermediation and FinTech

• Christophe Bisière, Matthieu Bouvard, Catherine Casamatta, Alexander Guembel.

Researchers in the Finance team study the role of financial intermediaries (banks, investment funds, venture capitalists) in the allocation of capital in the economy. They are also interested in the stability and resilience of the financial system, and in the problems of contagion and financial crises. Finally, they study the impact of information technologies on the development of new products (blockchain, cryptocurrencies, mobile money in developing countries). For example, Alexander Guembel’s research studies how public injection of liquidity into financial intermediaries in times of crisis affects the likelihood of contagion across countries. Christophe Bisière, Matthieu Bouvard and Catherine Casamatta study cryptocurrencies both in terms of stability and ability to provide means of payments and storage of value for real transactions. Matthieu Bouvard and Catherine Casamatta study the integration of financial services such as credit into the offering of Big Tech platforms such as Amazon or Alibaba.

Household finance and behavioral finance

• Milo Bianchi, Sophie Moinas, Sebastien Pouget.

Household finance studies individual investors’ decisions to enter the credit market or to invest. These decisions have major welfare effects as they condition access to essential resources such as housing or retirement income. Researchers in the Finance group also study the psychological mechanisms involved in investor decision-making. They analyze the dangers to which they are exposed, and how markets and institutions can be organized and regulated to help individual investors optimize their financial decisions. For example, Sophie Moinas and Sébastien Pouget design experiments to understand individual investors’ ability to use financial markets to share the risks they are exposed to. Milo Bianchi studies how Robo-advisors affect household’s investment decisions.