Emerging Markets in an Upside Down World: Challenging Perceptions in Asset Allocation and Investment

Further Research

Further research avenues present themselves, many already identified. A brief list of some avenues is provided below:

• Further research could be conducted on when volatility may be a good proxy for risk and when not.
• There is need for more research on investment choice and choice architecture. How does the availability of products on offer affect the choice of eligible asset classes?
• How does one adjust for biases? How do we incorporate into asset allocation the range of behavioural biases we know of? How can we use our knowledge of these biases to structure decisionmaking, and change institutional structures and incentives so as to make better investment decisions?
• There is scope for considerably more research on principal/agent chains in the investment industry, and how these may be improved.
• Regulating agency problems from a systemic risk point of view is also an avenue worthy of study, starting with something as simple as training and incentives for fiduciaries. If a fiduciary invests in the equivalent of a Madoff investment or Icelandic bank without proper due diligence it should not be an acceptable excuse, as in practice it largely is today, that others did the same.
• There is scope for research on the benefits of non-pecuniary incentives such as honour and duty as a means to combat principal/agent distortions.
• There is also ample scope for research into the design of dynamic rules for definition and acceptance of new asset classes into an investor’s universe ...