MacroScope

Hundreds of Bangladeshi investors have rioted on the streets of Dhaka in recent days over stock prices that have plunged nearly 18 percent since the start of the year. Police used batons and tear gas to break up protests that blocked roads around the country's main stock exchange.

If this sounds familiar, rewind back to 2008 to another part of the Indian subcontinent, when angry investors rampaged through the Karachi Stock Exchange after a series of precipitous share price falls.

In less developed markets, retail investors often bear the brunt of losses as they tend to account for the bulk of total investment rather than institutional players.

Seen to have greater resources to make more informed decisions than private individual investors, institutional investors account for roughly three-quarters of equity investment in the United States. Compare this to the leading emerging economy of China where they account for about half of the market.

The strength of emerging markets over the last two years, coupled with loose credit conditions, has lured many individual investors regardless of whether they possess the required nous for profitable risk-taking.

As rare as it is to get any two economists to agree, the chances are even slimmer of hearing three Nobel economics laureates concur.

And so it was that each of the award winning economists — Eric Maskin (2007), Michael Spence (2001) and Robert Merton(1997) — all had their own take on the legacy of three years of financial and economic crises when they spoke to a conference organised by Pioneer Investments  in London last week.

 To be fair, they broadly coagulated around the inevitability of greater regulation of banking and finance and also on the enormity of China’s now imposing position in world economic affairs.

He was probably only trying to be funny. But White House economist Austan Goolsbee touched a raw nerve by inferring Chinese investors currently exhibit the same kind of bubble mentality that Americans displayed prior to the collapse of the U.S. technology stock bubble in 2000.

Goolsbee, chief economist to Obama's Economic Recovery and Advisory Board, was asked if poll findings that 72 percent of Chinese would invest money in technology stocks, versus 60 percent of Americans who would put it in a bank, meant the United States had lost its nerve on taking risk.

"We are in a deep recession. It is clear that that has scared people," Goolsbee told a panel at a conference on innovation and the economy sponsored by Intel Corp. and the Aspen Institute.