The first recommendation for the authorities would be to introduce rational investment and rational decision making philosophy to all investors irrespective of the size of their investment. The initiative could be enforced to be applied and be imparted to all kinds of investments before approving the investment by the manager. The policy of investment philosophy could be well programed in the system with every single investment being asked and suggested to make a rational investigation of the decision to be made and then take complete responsibility of that decision. This can be done starting with the stock exchanges and running a financial literacy workshop for all investors. Bikhchandani and Sharma (2001) clearly indicate that when investors are influenced by other decision, they may herd on that investment decision that may prove wrong for all of them and make them lose their investments. This is the primary reason for introducing such literacy program, and the first implication would be that investors who have lost more than others will come forward first and equip themselves with rational decision making and rational investment knowledge.
The second policy introduction could be to introduce standard information disclosure system so that the transparency in information and reduce its uncertainty. Dornbusch, Park, and Claessens (2000) have discussed at length about information asymmetries and coordination problems and how they contribute to increasing confusing to investment decision. Investors in one country may think that a financial crisis in a different country may affect their country with the same problems when information if not disclosed properly. Information about possible risks and its likelihood must be disclosed publicly so that there is no ambiguity in the financial markets and investors have the right information to make right decisions.