Academic Research - February 24, 2011

Research can have an impact only if it is of practical use - an interview with Raman Uppal

In this interview, we talk to Raman Uppal, Professor of Finance at EDHEC Business School and Member of EDHEC-Risk Institute, about the reasons behind his decision to join EDHEC, his current research work, and the executive track of EDHEC-Risk Institute's PhD in Finance programme.

Raman Uppal

You joined EDHEC as professor of finance at the beginning of this year. Could we ask what motivated your choice of EDHEC?

Raman Uppal: I am quite excited to be at EDHEC and there are many reasons for my decision to join EDHEC. The first reason is that I am in the business of learning and there are many people here from whom I can learn new things. EDHEC has extremely good people who have industry experience. Given that my background is mostly in academics, this is a chance for me to learn about the industry from people who have a different background to mine. EDHEC’s uniqueness rests in its close relationship with the industry, and this means that I will also have the opportunity to put into practice the research that I have done so far.

Secondly, there is a lot of emphasis on doing high quality research. There are strong incentives to publish in the top journals and to do research that is relevant rather than of interest just to academics.

Thirdly, the finance group at EDHEC is very collegial. Therefore, it is a good set of people to work with. It was very important for me to find a good working environment.

Another reason for me to join EDHEC is that I was very attracted by the opportunity to teach advanced courses. I will be teaching two courses: "Foundations of asset pricing and portfolio management" in the MSc in Risk & Investment Management programme and "Continuous time finance" in the PhD in Finance programme.

EDHEC-Risk Institute has quite a distinctive business strategy compared to other research centres. How do you view this strategy?

Raman Uppal: It is my understanding that the strategy of EDHEC-Risk is to make sure that the research it supports is of high academic quality while also being of interest to the finance industry. This, in my view, is the perfect strategy for an applied field like Finance. The emphasis on the academic research being of the highest quality is critical for it to have a lasting impact on the profession. At the same time, research can have an impact only if it is of practical use. So, even research that is very theoretical in nature will be influential only if it changes how people think about making financial decisions. For example, some of the research that I am doing is about developing methods to solve general equilibrium models in which financial markets are incomplete. This is a very theoretical problem. But, its application is very wide - ranging from the problem of portfolio selection and rebalancing to policy-making by central banks.

Could we ask about your current research work? What themes are you working on at the moment?

Raman Uppal: In my research I am currently interested in answering two questions: first, “How should one manage and invest money?” It turns out that we don’t really have good answers to this basic question. So, a lot of my research is looking at the practical question of how to actually invest money. I did some research where I looked at what academic theory says about managing money, and I found that many models developed in the last 50 years perform very poorly out of sample, and consequently, one might be better off using very simple rules such as investing your money equally across assets.

The second issue that I am studying is the effects of different financial regulations to control stock market volatility. I am looking at regulatory measures such as short-sale constraints, margin constraints, borrowing constraints, Tobin tax (a tax on transactions). The traditional models in finance don’t allow us to look at these things because it is very hard to solve models in the presence of such constraints. I am trying to understand the effectiveness of these different regulatory measures, and what are the impacts of each measures on other economic variables such as the levels of the stock market and the interest rate.

You are a core faculty professor for EDHEC-Risk Institute’s PhD in Finance? What do you think of the executive track of this programme?

Raman Uppal: When I first heard of a PhD program for executives, I had some misgivings and I wondered how this kind of a program actually worked. But, after investigating the program more carefully I was amazed to see how many top faculty from around the world were teaching in this program. And, I was also very impressed by the students in this program, many of whom are very senior executives at top financial institutions and corporations. The students I have met are extremely smart, very talented, and strongly motivated. I am very much looking forward to teaching in this program.

About Raman Uppal

Professor Uppal’s research specialises in portfolio selection, asset pricing, and risk management. He has published widely in leading journals such as the Journal of Finance, the Review of Financial Studies, and Management Science.

He previously worked at London Business School and at the University of British Colombia and is a former Co-Director of the Financial Economics programme of the Centre for Economic Policy Research (CEPR).

Raman Uppal received a BA in Economics from Delhi University, followed by a Masters, an MBA and a PhD from the Wharton School of the University of Pennsylvania in the USA.

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