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News from London: Greek government bonds on the London Stock Exchange, 1914-1929

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  • Olga Christodoulaki
  • Jeremy Penzer
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    Abstract

    Statistical analysis of Greek sovereign debt denominated in gold and traded on the London Stock Exchange from the outbreak of the First World War until the advent of the Great Depression is employed to explore the way that historical events including political and institutional changes shaped investors’ expectations of the capacity of the Greek government to honour its debt obligations. No a priori specification of important dates is made. Military defeat and its aftermath exerted a strong negative impact on the value of Greek sovereign debt. The statistical analysis shows that investors acted upon news of public debt, fiscal performance and money supply. Unforeseen political events also influenced bondholders’ expectations over future payments. By contrast, institutional innovations such as the adoption of the Gold Exchange Standard and the establishment of a central bank de novo did not produce any quantitative market response. Stabilisation and the concomitant institutional reforms however, were factored into the market price of Greek sovereign debt traded in London.

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    File URL: http://eprints.lse.ac.uk/22335/
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    Bibliographic Info

    Paper provided by London School of Economics and Political Science, Department of Economic History in its series Economic History Working Papers with number 22335.

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    Length: 72 pages
    Date of creation: Nov 2004
    Date of revision:
    Handle: RePEc:ehl:wpaper:22335

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    Web page: http://www.lse.ac.uk/economicHistory/
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    1. Daniel Waldenström & Bruno S. Frey, . "How Government Bond Prices Reflect Wartime Events - The Case of the Stockholm Market," IEW - Working Papers 102, Institute for Empirical Research in Economics - University of Zurich.
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    10. Weidenmier, Marc D., 2000. "The Market for Confederate Cotton Bonds," Explorations in Economic History, Elsevier, vol. 37(1), pages 76-97, January.
    11. Frey, Bruno S. & Kucher, Marcel, 2000. "History as Reflected in Capital Markets: The Case of World War II," The Journal of Economic History, Cambridge University Press, vol. 60(02), pages 468-496, June.
    12. Wells, John & Wills, Douglas, 2000. "Revolution, Restoration, and Debt Repudiation: The Jacobite Threat to England's Institutions and Economic Growth," The Journal of Economic History, Cambridge University Press, vol. 60(02), pages 418-441, June.
    13. Marc D. Weidenmier, . "The Market for Confederate Cotton Bonds," Claremont Colleges Working Papers 1999-12, Claremont Colleges.
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