How should governments decide in the face of radical uncertainties such as those involved in climate change, energy policy, genetically modified organisms or nanotechnologies? How should scientists incorporate new, yet inconclusive evidence into their current state of knowledge and uncertainty? The standard normative theory of decision making and belief change in philosophy and economics, Bayesianism, seems incapable of giving satisfactory replies to these questions. The central aim of this project is to deal with the fundamental issue of which notion of rationality is appropriate for the new risks and severe uncertainties that we as a society are faced with today. A normative theory of decision making and belief change based on the idea that one's confidence in one's beliefs has a role to play in decision and learning will be developed. Consequences will be drawn for public decision making, and the ground shall be laid for applications to concrete decisions. Awareness of these fundamental questions and possible replies shall be promoted among actors in the decision making process.

Today, Europe faces a “crisis of values”. This crisis is related to the numerous challenges the European Union (“EU”) has faced in recent years – such as the sovereign debt crisis, the security crisis linked to the threat of terrorism, and the migration crisis. It has been characterized by a systemic deterioration in certain Member States of the EU’s founding values, such as democracy, the rule of law and the protection of fundamental rights. In particular, two Member States – Hungary and Poland – are experiencing a significant decline in the rule of law, which has involved the establishment of electoral autocracies that seek to undermine the limits on the exercise of executive power in order to maintain the dominant political party in power in the long term. Faced with the ineffectiveness of the political mechanisms intended to protect the rule of law in its Member States, the EU has developed a new strategy based on judicial and techno-managerial mechanisms. On the one hand, a number of preliminary references and infringement procedures that have been referred to the Court of Justice of the EU have found serious rule of law breaches in Hungary and Poland. Yet on the other hand, the EU has relied on instruments that were not specifically designed nor envisioned to protect the rule of law, such as the European Semester, the European Structural and Investment Funds, and the protection of EU’s financial interests. These mechanisms mainly pertain to the Economic and Monetary Union, cohesion policy and European fiscal policy, and rely on techno-managerial control mechanisms (indicators and scoreboards, benchmarking, peer reviews, etc.). While this new approach is likely to respond to criticisms regarding the lack of effectiveness of the Union's protection of the rule of law, it also raises some concerns. Firstly, the use of techno-managerial mechanisms is likely to undermine the constitutional balance of the Union by favouring, in particular, a management of the crisis of values by the European executive power and a marginalisation of parliamentary assemblies. Secondly, this new approach by the European Union could have the consequence that only those dimensions of the rule of law linked to economic and budgetary considerations will be effectively protected, to the detriment of other dimensions such as the rights of minorities, and thus, promote a conception of the rule of law that is not in compliance with international standards, such as those stemming from the Council of Europe. Using a pragmatic approach combined with an instrument-based approach and inductive reasoning, the MEDROI research project will critically analyse this new strategy. This has threefold-objective: (i) identify the techno-managerial control mechanisms mobilised by the EU alongside their effectiveness; (ii) analyse the consequences of this new approach for the protection of the rule of law within the EU; and (iii) assess the compatibility of this new approach by the EU with international standards for the protection of the rule of law. At the end of the two years covered by the project, MEDROI will mainly make it possible to identify the conception of the rule of law that is effectively produced by the EU through its new strategy, and to compare it with European and international standards for the protection of the rule of law; to assess the effectiveness of the protection of the rule of law in the EU; and to propose credible solutions to strengthen the protection of the rule of law in EU Member States.

We study the role that investors and financial intermediaries can play in tackling the climate emergency. Our aim is to harness financial economic theory and data analytics to generate recommendations useful to regulators and practitioners. Our proposal consists in three projects: • Project 1 offers an economic theory of the impact of responsible investors. We characterise the optimal investment policy across sectors of socially responsible investors seeking impact. The analysis generates concrete recommendations.. • Project 2 is mainly experimental. The goal is to determine whether people, when they are investing, care about the ethical dimensions of the firms they buy. The aim is to understand the psychology of non-pecuniary preferences and how it affects firm valuations. • Project 3 is empirical. We study how informational shocks regarding a company’s environmental performance affect market forecasts of its future earnings at various time horizons. Our project in multidisciplinary in its approach: the research consortium spans skills in economic theory, data analysis, psychology.

The project "Financial Infrastructure: Risks and Regulation" aims at studying the new regulatory framework in the organization of exchanges between financial institutions, called financial infrastructure. Following the financial crisis of 2008, major reforms of the financial market infrastructure have been undertaken worldwide. The goal of these reforms, only partially implemented, is to enhance the stability of the financial system, thereby ensuring a better financing of the economies and preventing taxpayers from paying for the failure of financial institutions. Our main objective is to assess the effectiveness of these regulatory measures on the risk of the financial system. The G20 in Pittsburgh in 2009 have been pushing for profound changes in the organization of exchanges to correct two shortcomings that might have explained the amplitude of the crisis: first, the exchanges of non-standard assets, such as sub-primes, from the United States to most Western countries through unidentified chains of intermediaries (the so-called shadow banking); second, the complexity and opacity of contracts linking institutions, as those of Lehman Brothers. To limit and better control these arrangements, regulators have required the use of Central Counter-Parties (CCP) for most transactions involving derivative securities, and the mandatory report of all trades on derivatives through companies called Trade Repositories (TRs). Central counter-parties are thus called to play a crucial role in preventing market disruptions such as Lehman Brothers. Though, a new risk arises: all members of a Central counter-party are exposed to its failure, which could have dramatic effects on markets and macroeconomic stability. While the studies on exchanges are vast, central counter-parties have so far received very limited attention and important aspects of the regulation are still under discussion. Our project aims to be a significant step in a comprehensive analysis of the impact of the CCPs on the stability of the financial markets and ultimately on the financing of the economy. To achieve our objectives, we need to make progress on three intertwined topics on the financial institutions and infrastructures: their regulation, their strategic behaviours and the systemic risk these generate. To this end, the project is divided into three parts, which study respectively the management of risks by a CCP, the impact of CCPs on the financial institutions and trades and the competition and interdependencies between CCPs and their regulators. We expect our project to help to design resilient institutions and infrastructures, to promote research in financial economics, and to make accessible to a large audience the functioning of how the financial institutions operate to get a better understanding of the risks they cover and generate. The project brings together researchers in finance and economics, with both empirical and theoretical expertise.

The proposed research project undertakes a comprehensive analysis of the role of unsystematic risk within the realm of financial markets. In contrast to prevailing conventional wisdom, which posits that only systematic risk is rewarded in financial markets, our investigation substantiates, both theoretically and empirically, that unsystematic risk harbors a discernible price of risk. Subsequently, we undertake a meticulous examination of the implications of this paradigm-shifting insight on several critical facets of financial markets, namely: (i) the cross-section of asset returns, (ii) the performance of active asset managers, (iii) the dynamic properties of asset-pricing anomalies, and (iv) the segmentation of asset markets. Our primary theoretical contribution resides in the transformation of the conventional risk-return tradeoff paradigm governing asset markets. Additionally, we provide a comprehensive framework for the accurate measurement of risk-adjusted returns. The principal empirical outcome of our analysis is the demonstration of the substantial quantitative significance associated with the compensation for unsystematic risk, a dimension heretofore ignored in the existing body of literature. These insights have far-reaching implications for portfolio choice, asset pricing, and risk management, which we study in a series of independent research papers. This research offers a substantial advancement in the understanding of financial markets and underscores the critical importance of reassessing the risk-reward tradeoff, fostering innovative perspectives, and catalyzing transformative change in the field of finance.