Essays on Stock Return and Volatility in Asian Stock Markets Research Proposal

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The paper "Stock Return and Volatility in Asian Stock Markets" is a great example of a research proposal on macro and microeconomics. Over the past three decades, the world has experienced a great move towards globalisation. One key aspect that has been at the centre of the globalisation process is financial liberalisation, particularly in emergent and developing economies. This has resulted in external linkages in the form of private investments, trade and capital mobility across different parts of the world. Capital mobility has been particularly high in the emerging Asian economies following the deregulation and thus opening up of these economies.

This process has come under serious attack from some of the prominent economists. Most of these critics argue that free capital mobility engenders financial and macroeconomic shakiness in the emerging markets (Venetis and Peel, 2005). Stiglitz (2002), in criticising the U. S. Treasury and the International Monetary Fund (IMF), claims that compelling emerging economies to lessen checks on capital mobility all through the 1990s was greatly reckless. Stiglitz argues that the relaxing of capital mobility controls were the main if not the sole contributors to several financial crises in the emerging markets, such as Mexico 1994, Asian Financial Crisis 1997, and Russia 1998, among others.

Even the IMF has condemned unrestricted capital mobility and has offered some support to capital controls. Rodrik and Kaplan (2003) indicate that the criticism has mainly been informed by the lack the institutional strength in most of the emerging markets to capitalise on an open capital account. They observe that poorly established capital markets plus weak financial organisation convert large changes in capital mobility to volatility. The volatility has major effects on the economy particularly on the cost of capital and investments decisions.

This volatility tends to increase when there is a financial crisis and stock market returns tend to behave in a similar way.

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