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Volatility in an Era of Reduced Uncertainty: Lessons from Pax Britannica

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  • William O. Brown
  • Richard C. K. Burdekin
  • Marc D. Weidenmier

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

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11319.

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Date of creation: May 2005
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Handle: RePEc:nbr:nberwo:11319

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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.

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