IDEAS home Printed from https://ideas.repec.org/a/bla/ehsrev/v77y2024i4p1414-1441.html

Bonds for the long run? The rate of return on corporate bonds in Belgium, 1838–1939

Author

Listed:
  • Kevin Van Mencxel
  • Jan Annaert
  • Marc Deloof

Abstract

We investigate corporate bond returns for the period 1838–1939 by compiling a unique new database of 201 000 monthly observations of bonds traded on the Brussels Stock Exchange. The value‐weighted annualized total rate of return, net of coupon defaults and taxes, is 4.35 per cent in nominal terms and 2.81 per cent in real terms. Estimates of average returns show that corporate bonds outperformed equities during the entire nineteenth century. We find that the risk‐adjusted performance of corporate bonds based on Sharpe ratios exceeds that of equities and sovereign bonds during the corporate bond market's first centennial.

Suggested Citation

  • Kevin Van Mencxel & Jan Annaert & Marc Deloof, 2024. "Bonds for the long run? The rate of return on corporate bonds in Belgium, 1838–1939," Economic History Review, Economic History Society, vol. 77(4), pages 1414-1441, November.
    • Handle: RePEc:bla:ehsrev:v:77:y:2024:i:4:p:1414-1441
    DOI: 10.1111/ehr.13330
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/ehr.13330
    Download Restriction: no
    File URL: https://libkey.io/10.1111/ehr.13330?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Baskin,Jonathan Barron & Miranti, Jr,Paul J., 1997. "A History of Corporate Finance," Cambridge Books, Cambridge University Press, number 9780521555142.
    2. repec:bla:ecpoli:v:16:y:2001:i:32:p:51-82 is not listed on IDEAS
    3. Erik Buyst, 1997. "New Gnp Estimates For The Belgian Economy During The Interwar Period," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(3), pages 357-375, September.
    4. Da Rin, Marco & Hellmann, Thomas, 2002. "Banks as Catalysts for Industrialization," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 366-397, October.
    5. Gareth Campbell & John D. Turner & Qing Ye, 2018. "The liquidity of the London capital markets, 1825–70†," Economic History Review, Economic History Society, vol. 71(3), pages 823-852, August.
    6. Baskin, Jonathan Barron, 1988. "The Development of Corporate Financial Markets in Britain and the United States, 1600–1914: Overcoming Asymmetric Information," Business History Review, Cambridge University Press, vol. 62(2), pages 199-237, July.
    7. Tyler Muir, 2017. "Financial Crises and Risk Premia," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(2), pages 765-809.
    8. Josefin Meyer & Carmen M Reinhart & Christoph Trebesch, 2022. "Sovereign Bonds Since Waterloo," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(3), pages 1615-1680.
    9. Giesecke, Kay & Longstaff, Francis A. & Schaefer, Stephen & Strebulaev, Ilya, 2011. "Corporate bond default risk: A 150-year perspective," Journal of Financial Economics, Elsevier, vol. 102(2), pages 233-250.
    10. Cortes, Gustavo S. & Taylor, Bryan & Weidenmier, Marc D., 2022. "Financial factors and the propagation of the Great Depression," Journal of Financial Economics, Elsevier, vol. 145(2), pages 577-594.
    11. repec:oup:qjecon:v:136:y:2021:i:1:p:51-113. is not listed on IDEAS
    12. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
    13. BenjaminR. Chabot & ChristopherJ. Kurz, 2010. "That's Where The Money Was: Foreign Bias and English Investment Abroad, 1866-1907," Economic Journal, Royal Economic Society, vol. 120(547), pages 1056-1079, September.
    14. Huberman, Michael & Meissner, Christopher M. & Oosterlinck, Kim, 2017. "Technology and Geography in the Second Industrial Revolution: New Evidence from the Margins of Trade," The Journal of Economic History, Cambridge University Press, vol. 77(1), pages 39-89, March.
    15. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 16(32), pages 52-82.
    16. Frederick R. Macaulay, 1938. "Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields and Stock Prices in the United States since 1856," NBER Books, National Bureau of Economic Research, Inc, number maca38-1, December.
    17. Gareth Campbell & Richard S Grossman & John D Turner, 2021. "Before the cult of equity: the British stock market, 1829–1929 [Rule Britannia! British stock market returns, 1825–1870]," European Review of Economic History, European Historical Economics Society, vol. 25(4), pages 645-679.
    18. W. Braddock Hickman, 1958. "Introduction and Summary of Findings to "Corporate Bond Quality and Investor Experience"," NBER Chapters, in: Corporate Bond Quality and Investor Experience, pages 3-27, National Bureau of Economic Research, Inc.
    19. le Bris, David & Goetzmann, William N. & Pouget, Sébastien, 2019. "The present value relation over six centuries: The case of the Bazacle company," Journal of Financial Economics, Elsevier, vol. 132(1), pages 248-265.
    20. repec:bla:revinw:v:43:y:1997:i:3:p:357-75 is not listed on IDEAS
    21. Goetzmann, William N. & Ibbotson, Roger G. & Peng, Liang, 2001. "A new historical database for the NYSE 1815 to 1925: Performance and predictability," Journal of Financial Markets, Elsevier, vol. 4(1), pages 1-32, January.
    22. Giesecke, Kay & Longstaff, Francis A. & Schaefer, Stephen & Strebulaev, Ilya A., 2014. "Macroeconomic effects of corporate default crisis: A long-term perspective," Journal of Financial Economics, Elsevier, vol. 111(2), pages 297-310.
    23. William Goetzmann & Roger Ibbotson & Liang Peng, 2000. "A New Historical Database For The NYSE 1815 To 1925: Performance And Predictability," Yale School of Management Working Papers ysm5, Yale School of Management, revised 01 Mar 2001.
    24. Hendrik Bessembinder & Kathleen M. Kahle & William F. Maxwell & Danielle Xu, 2009. "Measuring Abnormal Bond Performance," The Review of Financial Studies, Society for Financial Studies, vol. 22(10), pages 4219-4258, October.
    25. Kuvshinov, Dmitry & Zimmermann, Kaspar, 2022. "The big bang: Stock market capitalization in the long run," Journal of Financial Economics, Elsevier, vol. 145(2), pages 527-552.
    26. Buyst, Erik & Maes, Ivo, 2008. "Central banking in nineteenth-century Belgium: was the NBB a lender of last resort?," Financial History Review, Cambridge University Press, vol. 15(2), pages 153-173, October.
    27. W. Braddock Hickman, 1958. "Index to "Corporate Bond Quality and Investor Experience"," NBER Chapters, in: Corporate Bond Quality and Investor Experience, pages 531-536, National Bureau of Economic Research, Inc.
    28. Piet Eichholtz & Matthijs Korevaar & Thies Lindenthal & Ronan Tallec & Stijn Van Nieuwerburgh, 2021. "The Total Return and Risk to Residential Real Estate [House prices and fundamentals: 355 years of evidence]," The Review of Financial Studies, Society for Financial Studies, vol. 34(8), pages 3608-3646.
    29. Anarkulova, Aizhan & Cederburg, Scott & O’Doherty, Michael S., 2022. "Stocks for the long run? Evidence from a broad sample of developed markets," Journal of Financial Economics, Elsevier, vol. 143(1), pages 409-433.
    30. W. Braddock Hickman, 1958. "Corporate Bond Quality and Investor Experience," NBER Books, National Bureau of Economic Research, Inc, number hick58-1, December.
    31. Gerhard Bry & Charlotte Boschan, 1971. "Programmed Selection of Cyclical Turning Points," NBER Chapters, in: Cyclical Analysis of Time Series: Selected Procedures and Computer Programs, pages 7-63, National Bureau of Economic Research, Inc.
    32. Musacchio, Aldo, 2008. "Can Civil Law Countries Get Good Institutions? Lessons from the History of Creditor Rights and Bond Markets in Brazil," The Journal of Economic History, Cambridge University Press, vol. 68(1), pages 80-108, March.
    33. Bekaert, Geert & De Santis, Roberto A., 2021. "Risk and return in international corporate bond markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 72(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Turner, John D., 2014. "Financial history and financial economics," QUCEH Working Paper Series 14-03, Queen's University Belfast, Queen's University Centre for Economic History.
    2. Peter F. Basile & Sung Won Kang & John Landon-Lane & Hugh Rockoff, 2015. "Towards a History of the Junk Bond Market, 1910-1955," NBER Working Papers 21559, National Bureau of Economic Research, Inc.
    3. Rebecca Stuart, 2024. "Measuring stock market integration during the Gold Standard," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 18(1), pages 191-220, January.
    4. Charles Calomiris, 1995. "The Costs of Rejecting Universal Banking: American Finance in the German Mirror, 1870-1914," NBER Chapters, in: Coordination and Information: Historical Perspectives on the Organization of Enterprise, pages 257-322, National Bureau of Economic Research, Inc.
    5. John D. Turner, 2025. "Three centuries of corporate governance in the United Kingdom," Economic History Review, Economic History Society, vol. 78(1), pages 3-29, February.
    6. Richard Cantor & Frank Packer, 1996. "Sovereign risk assessment and agency credit ratings," European Financial Management, European Financial Management Association, vol. 2(2), pages 247-256, July.
    7. Grjebine, Thomas & Szczerbowicz, Urszula & Tripier, Fabien, 2018. "Corporate debt structure and economic recoveries," European Economic Review, Elsevier, vol. 101(C), pages 77-100.
    8. Ying Yi Tsai & Li-Gang Liu, 2010. "Emergence of Rating Agencies: Implications for Establishing a Regional Rating Agency in Asia," Working Papers id:2927, eSocialSciences.
    9. Bill M. Brister & Robert E. Kennedy & Pu Liu, 1994. "The Regulation Effect Of Credit Ratings On Bond Interest Yield: The Case Of Junk Bonds," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 21(4), pages 511-531, June.
    10. Robin Greenwood & Samuel G. Hanson, 2011. "Issuer Quality and the Credit Cycle," NBER Working Papers 17197, National Bureau of Economic Research, Inc.
    11. Dieckelmann, Daniel, 2021. "Market sentiment, financial fragility, and economic activity: The role of corporate securities issuance," Discussion Papers 2021/6, Free University Berlin, School of Business & Economics.
    12. Ravi Kashyap, 2019. "Michael Milken: The Junk Dealer," Papers 1910.13882, arXiv.org.
    13. Ying Yi Tsai & Li-Gang Liu, 2010. "Emergence of Rating Agencies : Implications for Establishing a Regional Rating Agency in Asia," Finance Working Papers 22824, East Asian Bureau of Economic Research.
    14. Acheson, Graeme G. & Campbell, Gareth & Turner, John D., 2016. "Common law and the origin of shareholder protection," QUCEH Working Paper Series 2016-04, Queen's University Belfast, Queen's University Centre for Economic History.
    15. David M. Levy & Sandra J. Peart, 2015. "Learning from Failure: A Review of Peter Schuck's Why Government Fails So Often: And How It Can Do Better," Journal of Economic Literature, American Economic Association, vol. 53(3), pages 667-674, September.
    16. Taneli Mäkinen & Fan Li & Andrea Mercatanti & Andrea Silvestrini, 2020. "Effects of eligibility for central bank purchases on corporate bond spreads," BIS Working Papers 894, Bank for International Settlements.
    17. Michael J. Alderson & Terry L. Zivney, 1994. "On Computing Bond Returns: The Evaluation Of Low-Grade Debt," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(3), pages 403-415, September.
    18. Peter H. Lindert & Peter J. Morton, 1989. "How Sovereign Debt Has Worked," NBER Chapters, in: Developing Country Debt and the World Economy, pages 225-236, National Bureau of Economic Research, Inc.
    19. Abildgren, Kim, 2014. "Far out in the tails – The historical distributions of macro-financial risk factors in Denmark," Nationaløkonomisk tidsskrift, Nationaløkonomisk Forening, vol. 2014(1), pages 1-31.
    20. Turner, John D., 2024. "Three centuries of corporate governance in the UK," QUCEH Working Paper Series 24-01, Queen's University Belfast, Queen's University Centre for Economic History.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ehsrev:v:77:y:2024:i:4:p:1414-1441. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/ehsukea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.