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Regulation - April 12, 2011

EDHEC finance professor Raman Uppal awarded research grant by the Foundation Banque de France

Each year the Foundation Banque de France for Economic Research invites research proposals for funding. EDHEC-Risk Institute is pleased to announce that the board of the foundation at its meeting of March 9, 2011, taking into account the assessment of the evaluation committee, awarded funding from its 15th call for proposals to a project entitled “Comparing Different Regulatory Measures to Control Stock Market Volatility: A General Equilibrium Analysis”.

Professor Raman Uppal of EDHEC Business School is one of the co-recipients of this funding, together with co-researchers Bernard Dumas (INSEAD), Adrian Buss and Grigory Vilkov (both Goethe University Frankfurt).

The project will compare the effects of different regulatory measures that a central bank can use to reduce stock market volatility and ensure orderly financial markets. The main contribution of the research is to evaluate a variety of regulatory measures within the same general equilibrium model, so that one can compare both the direct and indirect effects of these different measures within the same economic setting.

In particular, the kind of questions addressed are the following:

  • If a central bank wishes to reduce the volatility of stock markets, should it introduce a Tobin tax, short-sale constraint, borrowing constraint, margin constraints or some other constraint such as a limit on the value-at-risk?
  • What exactly is the channel through which each regulatory measure works?
  • What will be the impact of this regulatory measure on other variables, such as the level of the stock market, the magnitude of the market price of risk and the equity risk premium, the level of the riskless interest rate, the term structure of interest rates, the portfolio of individual investors, and the trading volume in financial markets?

Raman Uppal ia a Professor of Finance at EDHEC Business School. He was formerly Professor of Finance and Chair of the Finance Subject Area at the London Business School, having previously worked at the University of British Columbia. He has held visiting positions at K.U. Leuven, MIT, and LSE, and has served as co-director of the Financial Economics Programme of the Centre for Economic Policy Research. His research focuses on optimal portfolio selection and asset allocation in dynamic environments, valuation of securities in capital markets, risk management, and exchange rates. He has published widely in leading journals such as Journal of Economic Theory, Journal of Finance, Journal of Financial and Quantitative Analysis, Management Science and Review of Financial Studies, and has received numerous grants and awards for his research work. He currently serves as editor for Journal of Banking and Finance and advisory editor for Review of Finance.