Socio-economy & New Tech



Time horizon and investors risk taking in the presence of risk

The current economic crisis has been the opportunity for many to criticize the short-term focus of investors, whose one-track minds seem to be set on quickly collecting their own bonuses, sending the financial system into turmoil.
But do investment horizons really influence the functioning of markets or company management? Up to now, there has been no empirical evidence; however Jean-Noël Barrot has succeeded in demonstrating that this is indeed the case by studying the behavior of private equity funds. He has observed two phenomena. First, the more investors focus on the short term, the less they destabilize prices. Second, the more investors focus on the long term, the more the companies in which they hold shares file patents. His conclusion? “The economy would therefore benefit from long-term savings invested in shares.”
My research focuses on the contractual structure of private equity funds and its impact on their investment strategy. I am also interested in learning processes in financial markets. I show that rational learning - rather than overconfidence - may generate phenomena such as the fact that retail traders tend to trade too much.

An Eye on Investment Horizons

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École des Hautes Études Commerciales