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.
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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)
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