SS12 LOS 35.c

CFAI says that market liberalization does not increase volatility of returns in emerging markets in the short term and that empirical evidence supports this notion. Is this actually true? My understanding is that financial crises such as the '97 Asian crisis in Thailand, the current RE asset price bubble in China and potentially a lot of the volatility in emerging market indices was either created or exacerbated by ‘hot’ foreign capital inflows? Could someone point me towards the academic journals that support the CFAI’s assertion, I would like to see what their research methodology was?

Pretty sure it will be marked in the text if you are really dying to look it up. I think it is important to remember that any study done will be focusing on all emerging markets, not just a few that you remember/chose. Sometimes there will be volatility, sometimes not and it will depend on other variables. The studies will also attempt to control for other variables that may have caused increased volatility as in the cases you have mentioned. I don’t see where the text specifically states this (although I am not refuting your claim that it does). Do you mind directing me?

I am guessing that you were looking in Schweser. Look in the CFAI books if you haven’t already. More more detail.