Over the last academic year, two papers by LSF post-doctoral researcher Jérôme Dugast have been accepted by two of the best journals in academic finance.
His single-authored paper entitled “Unscheduled News and Market Dynamics” will appear in the Journal of Finance. The paper examines the equilibrium dynamics of limit order markets under the hypothesis that investors react to news with a stochastic delay. Continuous idiosyncratic liquidity shocks result in trades on both sides of the order book. News, therefore, arrives at random times. Following news, order flows become imbalanced and market depth is consumed, leading to positive covariance between price variability, trading volume, and order book imbalances. Holding the unconditional price variability constant, news frequency has a negative effect on both market depth and the variability-volume covariance, Dr Dugast found.
The paper “Data Abundance and Asset Price Informativeness”, written with Professor Thierry Foucault from HEC Paris, starts from the fact that information processing filters out the noise in data but takes time. Hence, low precision signals are available before high precision signals. The authors analyze how this feature affects asset price informativeness when investors can acquire signals of increasing precision over time about the payoff of an asset. As the cost of low precision signals declines, prices are more likely to reflect these signals before more precise signals become available. This effect can ultimately reduce price informativeness because it reduces the demand for more precise signals (e.g., fundamental analysis), they conclude. The authors make additional predictions regarding trade and price patterns. This paper has been accepted in the Journal of Financial Economics.
As a result of his excellent research, Jérôme Dugast has accepted a tenured associate professor position at the renowned Université Paris-Dauphine. He will leave the LSF over the summer to start his new job in Paris in September.
We wish Jérôme all the best for his future career.