Olivier David Zerbib
Welcome to my webpage. I will join Boston University as an Assistant Professor of Finance from July 2021.
Sustainable and environmental finance
Theoretical and empirical asset pricing
Email: o.d.a.zerbib "at" tilburguniversity.edu
Presentations: AFA PhD poster (2020), London School of Economics, Tilburg University, University of Zurich, Toulouse School of Economics, Paris Dauphine University, CREST (École Polytechnique - ENSAE), ISFA, Climate Economics Chair, University of Lille, University of Orléans, Dauphine PhD Workshop, Geneva Summit on Sustainable Finance (2020), Global Research Alliance for Sustainable Finance and Investment (GRASFI, Columbia University), Paris December Meeting (2020), Boston University, University of Toronto Rotman, RSM Erasmus Rotterdam, EDHEC Business School, ESSEC Business School, ESCP Business School, ESADE, Aix-Marseille School of Economics, University of Luxembourg.
Best Paper Award, Paris December Meeting (2020).
Abstract: This paper shows how sustainable investing affects asset returns through exclusionary screening and environmental, social, and governance (ESG) integration. I develop an asset pricing model with partial segmentation and heterogeneous preferences. I characterize two taste premia that clarify the relationship between ESG and financial performance and two exclusion premia generalizing Merton's (1987) premium on neglected stocks. By using the holdings of 453 green funds investing in U.S. stocks between 2007 and 2019 to proxy for sustainable investors' tastes, I estimate the model applied to green investing and sin stock exclusion. The annual taste effect ranges from -1.12% to +0.14% for the different industries and the average exclusion effect is 1.43%.
Environmental Impact Investing (with Tiziano De Angelis and Peter Tankov), R&R, Management Science
Presentations: Bachelier Finance Society One World Seminar, PRI Academic Network Conference (2020), University of Zurich, Global Research Alliance for Sustainable Finance and Investment (GRASFI, Columbia University).
Abstract: This paper shows how green investing spurs companies to reduce their greenhouse gas emissions by raising their cost of capital. Companies' emissions decrease when the proportion of green investors and their environmental stringency increase. However, heightened uncertainty regarding future environmental impacts alleviates the pressure on the cost of capital for the most carbon-intensive companies and pushes them to increase their emissions. We provide empirical evidence supporting our results by focusing on United States stocks and using green fund holdings to proxy for green investors' beliefs. When the fraction of assets managed by green investors doubles, companies' carbon intensity drops by 5% per year.
Optimal asset allocation with liquidity and withdrawal risks (with Areski Cousin, Ying Jiao, and Christian Robert)
Abstract: This study investigates the optimal asset allocation of a financial institution subject to liquidity risks and whose customers are free to withdraw their capital-guaranteed financial contracts at any time. Accounting for constraints on the solvency of the institution, we present a general optimization problem and provide a dynamic programming principle for the optimal dynamic investment strategies. Furthermore, we consider an explicit context, including the interest rate and credit intensity fluctuations, and show, by numerical results, that the optimal strategy improves the solvency and the asset returns of the institution compared to the baseline asset allocation.
The effect of pro-environmental preferences on bond prices: Evidence from green bonds, Journal of Banking and Finance, 2019
Winner of the SUERF/UniCredit Foundation & Universities Research Prize (2018); Best Paper Award, International Conference on Finance (2018); Best Paper Award, International Conference on Energy, Finance and the Macroeconomy (2017).
Abstract: We use green bonds as an instrument to identify the effect of non-pecuniary motives, specifically pro-environmental preferences, on bond market prices. We perform a matching method, followed by a two-step regression procedure, to estimate the yield differential between a green bond and a counterfactual conventional bond from July 2013 to December 2017. The results suggest a small negative premium: the yield of a green bond is lower than that of a conventional bond. On average, the premium is -2 basis points for the entire sample and for euro and USD bonds separately. We show that this negative premium is more pronounced for financial and low-rated bonds. The results emphasize the low impact of investors’ pro-environmental preferences on bond prices, which does not represent, at this stage, a disincentive for investors to support the expansion of the green bond market.
Asset allocation strategies in the presence of liability constraints (with Areski Cousin, Ying Jiao, and Christian Robert), Insurance: Mathematics and Economics, 2016
Abstract: The performance of portfolio managers is usually assessed by comparing their allocation strategies to a benchmark portfolio. A major issue for portfolio managers of liability driven institutions is that no benchmark is given to them, although they face mid-term objectives with short term constraints. No performance attribution methodology may then be used to serve as a reference. Assessing the performance of the asset manager as an agent, represents a major stake for the institution as a principal delegating a mandate of asset management. We propose an optimal asset allocation approach taking into account liability constraints to build a benchmark. This benchmark will be used to compare the ex-post effective performance of the asset manager to the effective performance of the ex-ante optimal dynamic asset allocation.
Other academic publications (in French)
Indicateurs environnementaux : caractéristiques d'une mesure agrégée pertinente (with Jean-Guillaume Peladan, Julie Raynaud, and Peter Tankov), Revue d'Economie Financière (special issue on Climate Finance), 2020
Abstract: After presenting the main existing environmental indicators and their limitations, we propose a definition of the (non-exhaustive) characteristics of a relevant and efficient metric in a holistic approach: encompassing all environmental issues, analyzing the entire life cycle, using physical measures, covering a global scope of analysis, being computable across all asset classes, being modular, operational, readable, neutral, transparent, stable over time and using the information already available, given the environmental emergency. Finally, we review the main available methods for aggregating environmental indicators with their advantages and drawbacks.
Le cancer du rein sporadique du sujet jeune : étude des particularités cliniques et anatomopathologiques d'une cohorte bicentrique (with Jérémy Cohen, Olivier Timsit, Morgan Rouprêt, Virginie Verkarre, Eva Comperat, Arnaud Mejean, and Olivier Bitker), Progrès en Urologie, 2018
Abstract: Our study showed a very significant increase in the incidence of renal tumors in our 11 years of decline (P = 6.10−15). The mode of discovery also seems to have evolved with a majority of tumors (67 %), due to the considerable growth of imaging in recent decades. We also showed a different pathological distribution compared to the literature with a significant increase in the number of papillary tumors (16.9 %) and chromophobes (15.2 %), in addition to a decrease in the number of carcinomas (43.2 %) as well as the appearance of a new pathological entity of particular clinical severity: renal carcinoma related to translocation Xp11.2 (15.3 %) (P < 10−5). Among the risk factors, hypertension seems to be a definite risk factor while tobacco and obesity do not have a significant influence.
Autour des taux d’intérêt écologiques (with Olivier Guéant and Jean-Michel Lasry), Cahiers de la Chaire Finance et Développement Durable, n°3, October 2007, (See Guéant, Guesnerie and Lasry, Ecological Intuition versus Economic “Reason”, Journal of Public Economic Theory, 2012, for further developments)
Abstract: Cet article consiste en un approfondissement de la notion de taux d’intérêt écologique introduite par Roger Guesnerie au début des années 2000. Si nous nous inscrivons dans une ﬁliation avec Roger Guesnerie en considérant une notion de taux d’intérêt écologique à la marge des optima, nous dérivons, en plus des résultats asymptotiques de celui-ci, des résultats à horizon ﬁni de deux types. Tout d’abord, d’un point de vue théorique, nous montrons que la discontinuité des taux écologiques à la frontière du blocage écologique est spéciﬁque au cas asymptotique et ne présente donc pas de problème économique contrairement à ce que certains économistes supposaient. Ensuite, nous présentons des résultats numériques sous la forme de courbes des taux d’intérêt écologique. L’on répondra donc, en particulier, à la question fondamentale de l’horizon d’application des résultats asymptotiques sur les taux d’intérêt écologiques. Aussi, nous montrerons que dans certaines conditions l’utilisation de taux d’intérêt négatifs à l’horizon d’un siècle est fondée.
Professional and policy papers
Is the EIB paving the way for a “Green Premium”?, Natixis Research Report, p6-7, April 2017
Evaluation de la gestion d'actifs d’un investisseur institutionnel, Groupama Asset Management Research Paper, Sept. 2016
La volatilité des ratios de Solvabilité 2 à l’épreuve des variations de marché : quelles solutions? (with Claire Bourgeois and Réda Jabrazko) ITEMS, n°2, June 2015
Equities: an attractive asset class for an institutional investor in the current environment, The letter Funds & Strategy n°136, 2014
The interest of simulating liabilities to optimize the asset allocation of an insurance company, The letter Funds & Strategy n°131, 2013
The advantage of introducing convexity into the assets of a life insurer, The letter Funds & Strategy n°128, 2013
Controling the volatility of an insurance company solvency, The letter Funds & Strategy n°115, 2012
The interest of hedging techniques under Solvency II, The letter Funds & Strategy n°114, 2012
Growing interest in diversifying asset classes, The letter Funds & Strategy n°113, 2012