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Volatility in an era of reduced uncertainty: Lessons from Pax Britannica

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  • Brown, William Jr.
  • Burdekin, Richard C.K.
  • Weidenmier, Marc D.

Abstract

Although it has been well established that financial volatility is related to news and macroeconomic shocks, there has been less emphasis on the importance of underlying economic and political stability. In this paper we study the behavior of consol returns since 1729 and identify a greater-than-50% decline in volatility from the end of the Napoleonic wars in 1815 until the First World War. News events and macroeconomic variables cannot account for this extended period of reduced volatility. Underlying political stability under Pax Britannica seems to be a more likely explanation, however.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 79 (2006)
Issue (Month): 3 (March)
Pages: 693-707

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Handle: RePEc:eee:jfinec:v:79:y:2006:i:3:p:693-707

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Web page: http://www.elsevier.com/locate/inca/505576

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Cited by:
  1. Roe, Mark J. & Siegel, Jordan I., 2011. "Political instability: Effects on financial development, roots in the severity of economic inequality," Journal of Comparative Economics, Elsevier, vol. 39(3), pages 279-309, September.
  2. Berkman, Henk & Jacobsen, Ben & Lee, John B., 2011. "Time-varying rare disaster risk and stock returns," Journal of Financial Economics, Elsevier, vol. 101(2), pages 313-332, August.
  3. Fagiani, Riccardo & Hakvoort, Rudi, 2014. "The role of regulatory uncertainty in certificate markets: A case study of the Swedish/Norwegian market," Energy Policy, Elsevier, vol. 65(C), pages 608-618.

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