Advanced Search
MyIDEAS: Login to save this paper or follow this series

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

Contents:

Author Info

  • 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.

Download Info

If 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.
File URL: http://www.nber.org/papers/w11319.pdf
Download Restriction: no

Bibliographic Info

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

as in new window
Length:
Date of creation: May 2005
Date of revision:
Publication status: published as Brown, William O., Jr., Richard C. K. Burdekin and Marc D. Weidenmier. "Volatility In An Era Of Reduced Uncertainty: Lessons From Pax Britannica," Journal of Financial Economics, 2006, v79(3,Mar), 693-707.
Handle: RePEc:nbr:nberwo:11319

Note: AP DAE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Ederington, Louis H & Lee, Jae Ha, 1993. " How Markets Process Information: News Releases and Volatility," Journal of Finance, American Finance Association, American Finance Association, vol. 48(4), pages 1161-91, September.
  2. Michael D. Bordo & Michael J. Dueker & David C. Wheelock, 2001. "Aggregate price shocks and financial stability: the United Kingdom 1796-1999," Working Papers, Federal Reserve Bank of St. Louis 2001-018, Federal Reserve Bank of St. Louis.
  3. G.K. Harley, 1976. "Goschens's conversion of the National Debt and the Yield on Consols," Economic History Review, Economic History Society, Economic History Society, vol. 29(1), pages 101-106, 02.
  4. Heather Mitchell & Rob Brown & Stephen Easton, 2002. "Old volatility - ARCH effects in 19th century consol data," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(4), pages 301-307.
  5. Niederhoffer, Victor, 1971. "The Analysis of World Events and Stock Prices," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 44(2), pages 193-219, April.
  6. Neal, Larry, 2000. "How it all began: the monetary and financial architecture of Europe during the first global capital markets, 1648 1815," Financial History Review, Cambridge University Press, Cambridge University Press, vol. 7(02), pages 117-140, October.
  7. G. William Schwert, 2001. "Stock Volatility in the New Millennium: How Wacky Is Nasdaq?," NBER Working Papers 8436, National Bureau of Economic Research, Inc.
  8. David H. Cutler & James M. Poterba & Lawrence H. Summers, 1988. "What Moves Stock Prices?," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 487, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Ray Fair, 2001. "Shock Effects on Stocks, Bonds, and Exchange Rates," Yale School of Management Working Papers, Yale School of Management ysm172, Yale School of Management, revised 01 Aug 2001.
  10. William Schwert, G., 1989. "Business cycles, financial crises, and stock volatility : Reply to Shiller," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 31(1), pages 133-137, January.
  11. Robert J. Barro, 1999. "Notes on Optimal Debt Management," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 281-289, November.
  12. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche, Centre interuniversitaire de recherche en économie quantitative, CIREQ 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  13. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1.
  14. Michael J. Fleming & Eli M. Remolona, 1999. "Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information," Journal of Finance, American Finance Association, American Finance Association, vol. 54(5), pages 1901-1915, October.
  15. Jones, Charles M. & Lamont, Owen & Lumsdaine, Robin L., 1998. "Macroeconomic news and bond market volatility," Journal of Financial Economics, Elsevier, Elsevier, vol. 47(3), pages 315-337, March.
  16. G. William Schwert, 1990. "Business Cycles, Financial Crises, and Stock Volatility," NBER Working Papers 2957, National Bureau of Economic Research, Inc.
  17. G. William Schwert, 1990. "Why Does Stock Market Volatility Change Over Time?," NBER Working Papers 2798, National Bureau of Economic Research, Inc.
  18. repec:kap:eurfin:v:10:y:2006:i:4:p:613-644 is not listed on IDEAS
  19. Berry, Thomas D & Howe, Keith M, 1994. " Public Information Arrival," Journal of Finance, American Finance Association, American Finance Association, vol. 49(4), pages 1331-46, September.
  20. Ray Fair, 2003. "Events that Shook the Market," Yale School of Management Working Papers, Yale School of Management ysm307, Yale School of Management.
  21. Haugen, Robert A & Talmor, Eli & Torous, Walter N, 1991. " The Effect of Volatility Changes on the Level of Stock Prices and Subsequent Expected Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 46(3), pages 985-1007, July.
  22. Voth, Hans-Joachim, 2002. "Why was Stock Market Volatility so High During the Great Depression? Evidence from 10 Countries During the Interwar Period," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3254, C.E.P.R. Discussion Papers.
  23. Anindya Banerjee & Robin L. Lumsdaine & James H. Stock, 1990. "Recursive and Sequential Tests of the Unit Root and Trend Break Hypothesis: Theory and International Evidence," NBER Working Papers 3510, National Bureau of Economic Research, Inc.
  24. Klovland, Jan Tore, 1994. "Pitfalls in the Estimation of the Yield on British Consols, 1850–1914," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 54(01), pages 164-187, March.
  25. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, Econometric Society, vol. 59(2), pages 347-70, March.
  26. Larry Neal, 1998. "The financial crisis of 1825 and the restructuring of the British financial system," Review, Federal Reserve Bank of St. Louis, issue May, pages 53-76.
  27. Bagehot, Walter, 1873. "Lombard Street: A Description of the Money Market," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, McMaster University Archive for the History of Economic Thought, number bagehot1873.
  28. Mitchell, Mark L & Mulherin, J Harold, 1994. " The Impact of Public Information on the Stock Market," Journal of Finance, American Finance Association, American Finance Association, vol. 49(3), pages 923-50, July.
  29. Penman, Stephen H., 1987. "The distribution of earnings news over time and seasonalities in aggregate stock returns," Journal of Financial Economics, Elsevier, Elsevier, vol. 18(2), pages 199-228, June.
  30. Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-47, August.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

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.
  2. Berkman, Henk & Jacobsen, Ben & Lee, John B., 2011. "Time-varying rare disaster risk and stock returns," Journal of Financial Economics, Elsevier, Elsevier, vol. 101(2), pages 313-332, August.
  3. Fagiani, Riccardo & Hakvoort, Rudi, 2014. "The role of regulatory uncertainty in certificate markets: A case study of the Swedish/Norwegian market," Energy Policy, Elsevier, Elsevier, vol. 65(C), pages 608-618.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:11319. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.