That's Where the Money Was: Foreign Bias and English Investment Abroad, 1866-1907
AbstractWhy did Victorian Britain invest so much capital abroad? We collect over 500,000 monthly returns of British and foreign securities trading in London and the United States between 1866 and 1907. These heretofore-unknown data allow us to better quantify the historical benefits of international diversification and revisit the question of whether British Victorian investor bias starved new domestic industries of capital. We find no evidence of bias. A British investor who increased his investment in new British industry at the expense of foreign diversification would have been worse off. The addition of foreign assets significantly expanded the mean-variance frontier and resulted in utility gains equivalent to a meaningful increase in lifetime consumption.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Economic Growth Center, Yale University in its series Working Papers with number 972.
Length: 34 pages
Date of creation: Jun 2009
Date of revision:
Capital markets; Home bias; History; Victorian overseas investment;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
- N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-03 (All new papers)
- NEP-HIS-2009-07-03 (Business, Economic & Financial History)
- NEP-MAC-2009-07-03 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Roon, F.A. de & Nijman, T.E., 1998.
"Testing for mean-variance spanning: A survey,"
1998-132, Tilburg University, Center for Economic Research.
- DONALD N. McCLOSKEY, 1970. "Did Victorian Britain Fail?," Economic History Review, Economic History Society, vol. 23(3), pages 446-459, December.
- Alan G. Ahearne & William L. Griever & Francis E. Warnock, 2000.
"Information costs and home bias: an analysis of U.S. holdings of foreign equities,"
International Finance Discussion Papers
691, Board of Governors of the Federal Reserve System (U.S.).
- Ahearne, Alan G. & Griever, William L. & Warnock, Francis E., 2004. "Information costs and home bias: an analysis of US holdings of foreign equities," Journal of International Economics, Elsevier, vol. 62(2), pages 313-336, March.
- Peter Temin, 1989. "Capital exports, 1870-1914: a reply," Economic History Review, Economic History Society, vol. 42(2), pages 265-266, 05.
- Patrick F. Rowland & Linda L. Tesar, 1998.
"Multinationals and the Gains from International Diversification,"
NBER Working Papers
6733, National Bureau of Economic Research, Inc.
- Patrick F. Rowland & Linda L. Tesar, 2004. "Multinationals and the Gains from International Diversification," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 789-826, October.
- Rowland, P.F. & Tesar, L.L., 1998. "Multinationals and the Gains from International Diversification," Working Papers 425, Research Seminar in International Economics, University of Michigan.
- Karen K. Lewis, 1999. "Trying to Explain Home Bias in Equities and Consumption," Journal of Economic Literature, American Economic Association, vol. 37(2), pages 571-608, June.
- Gibbons, Michael R & Ross, Stephen A & Shanken, Jay, 1989. "A Test of the Efficiency of a Given Portfolio," Econometrica, Econometric Society, vol. 57(5), pages 1121-52, September.
- Crafts, N F R & Leybourne, S J & Mills, Terence C, 1989. "The Climacteric in Late Victorian Britain and France: A Reappraisal of the Evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(2), pages 103-17, April-Jun.
- N. F. R. Crafts, 1979. "Victorian Britain Did Fail," Economic History Review, Economic History Society, vol. 32(4), pages 533-537, November.
- Huberman, Gur & Kandel, Shmuel, 1987. " Mean-Variance Spanning," Journal of Finance, American Finance Association, vol. 42(4), pages 873-88, September.
- William N. Goetzmann & Andrey Ukhov, 2005.
"British Investment Overseas 1870-1913: A Modern Portfolio Theory Approach,"
NBER Working Papers
11266, National Bureau of Economic Research, Inc.
- William N. Goetzmann & Andrey D. Ukhov, 2006. "British Investment Overseas 1870-1913: A Modern Portfolio Theory Approach," Review of Finance, European Finance Association, vol. 10(2), pages 261-300.
- William Goetzmann & Andrey Ukhov, 2005. "British Investment Overseas 1870-1913: A Modern Portfolio Theory Approach," Yale School of Management Working Papers ysm445, Yale School of Management.
- J. Bradford De Long & Richard Grossman, 1992. "Excess Volatility on the London Stock Market, 1870-1990," J. Bradford De Long's Working Papers _133, University of California at Berkeley, Economics Department.
- Harold L. Cole & Maurice Obstfeld, 1989.
"Commodity Trade and International Risk Sharing: How Much Do Financial Markets Matter?,"
NBER Working Papers
3027, National Bureau of Economic Research, Inc.
- Cole, Harold L. & Obstfeld, Maurice, 1991. "Commodity trade and international risk sharing : How much do financial markets matter?," Journal of Monetary Economics, Elsevier, vol. 28(1), pages 3-24, August.
- Peter Temin, 1987. "Capital exports, 1870-1914: an alternative model," Economic History Review, Economic History Society, vol. 40(3), pages 453-458, 08.
- DONALD N. McGLOSKEY, 1979. "No It Did Not: A Reply to Crafts," Economic History Review, Economic History Society, vol. 32(4), pages 538-541, November.
- repec:cup:cbooks:9780521584401 is not listed on IDEAS
- Kennedy, W. P., 1974. "Foreign investment, trade and growth in the United Kingdom, 1870-1913," Explorations in Economic History, Elsevier, vol. 11(4), pages 415-444.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Danishevsky).
If references are entirely missing, you can add them using this form.