Fields: International Economics, International Finance, Applied Econometrics, Macroeconomics
University of Lausanne • 2022
SciencesPo (Paris), Visiting Student • July 2021 - Dec 2021
University of Lausanne • 2017
Philippe Bacchetta, Simon Tièche, and Eric van Wincoop • Working Paper: October 2020
Using data on international equity portfolio allocations of US mutual funds, we estimate a simple portfolio expression derived from a standard mean-variance portfolio model extended with portfolio frictions. The optimal portfolio depends on previous month and buy-and-hold portfolio shares, and a present discounted value of expected excess returns. We show that equity return differentials are predictable and use this prediction in the portfolio regressions. The estimates imply significant portfolio frictions and a modest rate of risk aversion. While portfolios respond significantly to expected returns, portfolio frictions lead to weaker and more gradual portfolio response. We also document heterogeneity across funds.
Simon Tièche • Working Paper: May 2021
Using large data on international equity portfolio allocations of international mutual funds, I identify a sizable fraction of zero allocations. I start by discussing how to find relevant shares of zero in any optimal allocation with finite alternatives. Then, I motivate country shares of zero with a model of optimal portfolio choice. This model relates the portfolio share to past and buy-and-hold portfolios, expected future excess returns, short-selling constraints and entry cost. Given the structure of the data, I develop an econometric model able to estimate this portfolio equation. Specifically, it estimates a dynamic panel model with corner solutions (i.e. the zeroes), high dimensional fixed effects and endogenous variables. I find that linear estimators underestimate the impact of excess returns by a factor of 3.5 to 5. In a final exercise, I simulate data and discuss how to treat original allocations reported by the funds when we observe a smaller subset of alternatives.