Do investors holding risky financial securities tend to invest in the stock market, buying at the top and selling at the bottom ? Do they reduce their risk exposure with age and especially when approaching retirement? We answer these questions using data on Madelin contracts from a large French insurer over the period 2002 to 2009. Subscribers can invest their savings in two types of investment vehicles: a euro fund composed primarily of money market securities with almost no risk, and unit-linked funds representing shares of money market funds invested in risky securities. We show that the share of capital invested in unit-linked funds is sensitive to market conditions, but mainly at the date of subscription. Once the initial share has been selected, inertia of portfolio choice is observed as investors rarely revise their position subsequently. We observe a steep procyclicality of investment choices which can be explained by an extrapolation of recent market performance. New subscribers buy risky assets when the stock market rises and stop buying them when it drops. This leads them to hold a minimum share of risky assets in 2004, the beginning of a 4-year rising phase and a maximum share in 2008 at the beginning of the market fall market due to the financial crisis. We also find that the risky share declines steadily with age once time effects are controlled for and cohort effects are excluded. The age profile also declines in the reverse configuration (taking into account cohort effects and excluding time effects) but the decline is less pronounced. It is in fact the product of two phenomena. On one hand the number of investors investing in risky assets tends to increase with age. On the other hand, conditional on investing in risky shares, equity share tends to decrease with age. After a discussion of the plausibility of the different effects, we estimate a probability of unit-linked detention which increases by about 12 percentage points with age between ages 40 and 60, and a conditional equity share which decreases by about 6 percentage points with age between 40 and 60 years. The decrease is too small to bring the invested share to zero when approaching retirement.
