Publications
Publications
Journal of Risk and Insurance here // WP Banque de France here
-- Winner of the Robert C. Witt Award delivered by the ARIA - best paper published in the JRI in 2022
This paper examines the long-term evolution of the linkages of the insurance sector with financial and non-financial companies. We develop a measure of connectedness using a multifactor model of weekly equity returns. The empirical analysis is conducted from 1973 to 2018, for 16 developed countries, at both the sectoral and institution levels. The results indicate that, unlike other sectors, the connectedness level of the insurance industry has strengthened over time. We also find that the linkages of the largest insurance companies with financial and non-financial firms are structurally different but as high as those of the largest banks.
Keywords: Comovements; Insurance sector; Interconnectedness; Macroprudential supervision; Systemic risk
JEL classification: G22, G15
(with Arthur Stalla-Bourdillon, Banque de France)
Review of World Economics here // WP Banque de France here
-- Best paper award of the Paris Sustainable Finance Forum (EFD 2023, Kedge Business School)
-- Press coverage: Option Finance (by Jean-François Boulier)
This paper examines the dynamic nature of pro-environmental preferences through an analysis of sector valuations in global equity markets from 2018 to 2023. We classify companies into three groups based on their business activities: green (e.g., renewables), neutral, and brown (e.g., fossil energy). We then run panel regressions to test whether being in the green or brown sectoral category affects stock valuations. We find that investors value sector affiliation, positively for green and negatively for brown, even after controlling for other firm-level financial and extra-financial characteristics. The effect is sizeable, as we report a 24% overvaluation of companies in green sectors and a 12% undervaluation of companies in brown sectors on average compared to the rest of the market. In addition, companies in green sectors have come under increased investor scrutiny since 2018 and appear increasingly overvalued relative to the rest of the market, suggesting that pro-environmental preferences have become more prevalent among investors.
Keywords: Environmental preferences, Green bubble, Mispricing, Stock market, Stranded assets, Valuation ratio
JEL classification: G10, G32, Q54
(with Quentin Moreau, The Hong Kong University of Science and Technology)
-- Winner of the 2023 Ieke van den Burg Prize, delivered by the ESRB
-- 2024 E-axes Forum Research Prize - Honorable Mention - webinar - policy brief
-- Best paper award of the 30th Global Finance Conference
This paper introduces a market-based framework to study the effects of tail climate risks in the financial sector. In addition to identifying the financial institutions most vulnerable to physical and transition climate risks, our framework explores the potential for these risks to induce contagion effects in the financial sector. Based on the securities of large European financial institutions spanning from 2005 to 2022, we show that, unlike physical risk, transition risk significantly and increasingly influences systemic risk in the financial sector. We also examine the potential levers available to financial institutions and regulators to address climate-related financial risk.
Keywords: Climate risks, contagion, ESG, financial stability, systemic risk
JEL classification: G10, G20, G32, Q54
Presentations: 2025 AFA Meeting, 2024 WFA Meeting, 2024 OFR Rising Scholars, GRASFI (scheduled), 2024 CEBRA conference, HEC/HKUST seminar, 2023 RiskLab/BoF/ESRB Conference, 3rd Sustainable Finance Conference (Toulouse School of Economics), 2025 GW4 sustainable finance conference (Univ. of Bath), 2023 Financial Risks International Forum (Institut Louis Bachelier), 2022 JRC Summer School on Sustainable Finance, 2022 GFRA conference (Banque de France and Institut Louis Bachelier), 30th Global Finance Conference, 2022 Sustainable Finance Forum (AFFI), 8th Paris Financial Management Conference, Sustainable Finance and Corporate Governance workshop (IAE Lille), Financial Markets and Corporate Governance Conference (Deakin University), Banque de France seminar, SKEMA Business School seminar, and 2022 AREA workshop (Université Paris-Dauphine).
(with Kolotcholoma Koné, Université Paris 1 Panthéon Sorbonne)
This paper assesses the transition climate risk exposure of European investment funds based on brown asset holdings. We then use confidential data on fund liabilities to estimate the indirect exposure of various investor categories to transition climate risks through their holdings of fund shares. We show that a large number of funds appear vulnerable to climate shocks, leading to substantial transmission risks to various types of investors, in particular insurers and households. Based on panel regressions, we also find that, unlike households, insurers seem aware of this risk and integrate climate risk exposure as a criterion in their fund selection process.
Keywords: Climate risk, contagion, financial stability, investment funds, systemic risk, transition risk
JEL classification: G11, G23, Q54
Presentations: FSB-AGV meeting (Banque de France, 2023), FSB-CVD meeting (Frankfurt, 2023)
(with Kiet Duong, Univ. of York & Quentin Moreau, HKUST)
-- Received a Research funding from the Hong Kong University of Science and Technology (Division of Environment and Sustainability) in 2024 (~$10,500)
(with Floris Van Dijk & Martin Saillard, Banque de France)
(with Stefano Grillini, Univ. of Bradford)
(with Kuntara Pukthuanthong, Univ. of Missouri)
(with Urszula Szczerbowicz, SKEMA Business School & Floris Van Dijk, Banque de France)
This paper examines the effect of data granularity (i.e., country indices, local industry portfolios, or individual securities) on the long-term evolution of international stock return correlation. We then analyze the implications of changing correlations on the benefits of international portfolio diversification. We show that the choice of base assets impacts the evolution of international stock return correlation and helps explain the contradictory findings in the literature. We thus develop indicators that yield consistent results regardless of data granularity and provide a decomposition of the main drivers of international diversification benefits. Based on a sample of 15 European stock markets between 1973 and 2018, we highlight that the decline in international diversification is not as severe as it seems, as it partly stems from the rise in the benefits of domestic diversification.
Keywords: Correlation; Data granularity; Equity portfolio; European stock markets; International diversification benefits
JEL classification: G11, G12, G15
Presentations: European Economics and Finance Society (Genova, 2019), Dauphine Financial Economics Workshop (Paris, 2019)
This paper studies the long-term effect of international trade and financial linkages on the rise in stock return comovements. Our sample covers 47 advanced and emerging markets from 1973 to 2018. We use dynamic panel models that are appropriate for estimating long-term relationships in macro panel data. The results indicate that the rise in comovements among advanced markets is due to trade globalization. Conversely, growing comovements among emerging markets stem from equity market liberalization (i.e., increased foreign holdings of emerging stocks). These findings have key implications on financial stability and indicate the existence of an international diversification puzzle.
Keywords: Comovements; CS-DL; CS-ARDL; Globalization; International diversification; Stock markets
JEL classification: E44, G15, C23, F65
Presentations: Macro Finance Seminar SDFi (Paris-Dauphine University, 2020), Dauphine Doctoral Workshop (2020), Center for Research in Economics (UCLouvain Saint-Louis, 2019)