Well your second theory is correct, however i'm not sure how it well affect paint degradation,
I would have thought it was down to the chemical compound not being as resilient to sunlight,
but then again car paint is more advanced now so fade won't happen for years and so has the paint protectors (polish's and waxs, etc) becoming more advanced so I don't think this is a major problem and besides I would be happy to maintain my red colour on my car as this is my favourite colour for a car

(my car isn't actually red, I was just saying.....)