Volatility in an era of reduced uncertainty: Lessons from Pax Britannica
AbstractAlthough 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 InfoArticle provided by Elsevier in its journal Journal of Financial Economics.
Volume (Year): 79 (2006)
Issue (Month): 3 (March)
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Web page: http://www.elsevier.com/locate/inca/505576
Other versions of this item:
- William O. Brown & Richard C. K. Burdekin & Marc D. Weidenmier, 2005. "Volatility in an Era of Reduced Uncertainty: Lessons from Pax Britannica," NBER Working Papers 11319, National Bureau of Economic Research, Inc.
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
- N2 - Economic History - - Financial Markets and Institutions
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