Bernard Dumas’s research while affiliated with INSEAD and other places

... Our focus is on optimal investment/consumption problems, but there is a parallel literature on optimal investment problems involving maximising expected utility at a distant terminal horizon, see, for example, Dumas and Luciano [12] for an explicit solution in the one-asset case and Bichuch and Guasoni [3] for recent work in a setting similar to ours with liquid and illiquid assets. ...

Reference:

A multi-asset investment and consumption problem with transaction costs

... We employ the most effective measure of investor sentiment (Baker and Wurgler, 2006), which encapsulates an investor's optimism or pessimism regarding the stock market's future prospects. This index is used in or has inspired numerous studies (Dumas et al., 2017;Zhu et al., 2020). The first model (Row2) presented in Table 8 explains 80% of the variance in trading volume, indicating that this model accounts for most of the variation in stock liquidity. ...

Reference:

The influence of economic policy uncertainty on stock market liquidity? The mediating role of investor sentiment

... In particular, even the most frequently traded assets have limited liquidity provided in the market. Hence, the dynamic interplay between asset prices and agents' trading behaviors under the presence of trading costs has been a focal point of extensive research; see [2,11,26,35]. To establish a theoretical foundation for the impact of illiquidity, it is essential to formulate equilibrium asset pricing models. ...

Reference:

Generative Market Equilibrium Models with Stable Adversarial Learning via Reinforcement

... By throwing sand in the wheels of foreign exchange markets, one hopes to prevent certain types of traders from entering the market, and restrain short-term speculative capital flow (Yin et al., 2022). Compared with asset position limits and financing constraints, the Tobin tax is a price-type capital control tool, and can limit speculative trading without undermining the risk-sharing mechanism in capital markets (Berentsen et al., 2016;Buss et al., 2016). ...

Reference:

Tobin Tax, Carry Trade, and the Exchange Rate Dynamics

... Third, because the global access to information and advancement in information technology eliminate information asymmetry between local and foreign investors, the mass production of news gives rise to a greater potential for investors to have distinct interpretations on the same piece of information. Local investors may be better equipped to understand local news than foreign investors (Dumas, Lewis, and Osambela 2017), and they trust and analyze local news more than foreign news (Jia, Wang, and Xiong 2017). Likewise, if foreign investors believe their home media coverage is more reliable and interpretable, they will increase their investment in local stocks covered in their home media outlets. ...

Reference:

Foreign Investment under the Spotlight of Home Media

... In markets with more than two agents, µ is only implicitly defined, making even advanced deep learning-based numerical methods, such as the FBSDE Solver from [24], inapplicable. Although there are tailored numerical methods for specific incomplete financial equilibria in discrete-time [11,16], a general framework for continuous-time equilibrium models remains elusive. ...

Reference:

Generative Market Equilibrium Models with Stable Adversarial Learning via Reinforcement

... Our model can be viewed as that of agents with loss aversion toward consumption changes. Wang (1996), Basak and Cuoco (1998), Chan and Kogan (2002), Dumas et al. (2009), Bhamra and Uppal (2009, Longstaff and Wang (2012), and Gârleanu and Panageas (2015) investigate models with heterogeneous agents. We also consider consumer heterogeneity and focus on heterogeneity in consumption adjustments or in loss aversion, which none of these works investigate. ...

Reference:

Asset Pricing with Consumption Frictions

... The factors that affect stock return interdependence is an issue of ongoing research (e.g., Pretorius, 2002;Solnik et al., 1996;Longin and Solnik, 1995;Forbes and Chinn, 2004;Dumas et al., 2003;Wälti, 2011;King et al., 1994;Kiviaho et al., 2014). Generally, stocks are presumed to react to both macroeconomic fundamentals and financial variables. ...

Reference:

The role of oil as a determinant of stock market interdependence: The case of the USA and GCC

... Trading costs compound these difficulties, because they severely complicate the corresponding optimisation problems. Accordingly, the literature on equilibrium asset prices with transaction costs has focused either on numerical methods (Heaton and Lucas [32], Buss et al. [14], Buss and Dumas [13]) or on models where the market volatility is either zero (Vayanos and Vila [59], Lo et al. [43], Weston [60]) or given exogenously (Vayanos [58], Gârleanu and Pedersen [26], Sannikov and Skrzypacz [54], Bouchard et al. [10]). ...

Reference:

Equilibrium asset pricing with transaction costs

... Moussa et al. (2021) used multiple models like the 'Engle-Granger two-step cointegration approach', 'two-state Markov-switching model', 'DCC-FIAPARCH (1,d,1) model', 'ARCH' and 'GARCH models' techniques. Other multi-models employed include 'OLS' and 'GARCH' (Kasman et al., 2011), 'OLS' and'EGARCH' (Lael Joseph &Vezos, 2006), 'MGARCH', 'nonlinear seemingly unrelated regression (NSUR) through GMM and pricing kernel (PK)' approach by Dumas and Solnik (1995) (Tai, 2000), 'OLS' and 'GLS' (generalised -least squares) (Harris et al., 1991), 'SUR', 'non-parametric: Spearman's rank correlation', 'event study', 'OLS' and 'SUR' (Akella & Greenbaum, 1992), 'OLS' and 'event study' (Binici & K€ oksal, 2013), 'Event study' and 'SUR' (Crouzille et al., 2006) and 'Conditional Autoregressive Range' (CARR) model and 'Time-Varying Parameter-Vector Autoregressive' (TVP-VAR) based Diebold-Yilmaz Connectedness Index (Yakup, 2022). ...

Reference:

Macro-financial nexus: a systematic review on the impact of macroeconomic factors on bank stock returns