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The Colombian Stock Market: 1930-1998

Author

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  • Ignacio Vélez Pareja

Abstract

This article explores the behavior of the stock market in Colombia with the information given by the Bolsa de Bogota Index (Indice de la Bolsa de Bogota, IBB). The index is analyzed from January, 1930 to December, 1998. The inflation rate covers the same period; the inflation rate as measured by the Consumer Price Index. This exploratory paper does not intend to present conclusive remarks: in fact, there more questions than answers. They are just ideas to work on. The trends of this analysis show that monthly and per annum return -nominal and real- are well below from the expected return of any financial investor. A first hypothesis to explain this is that the investor and entrepreneurs receive benefits that are non- measurable in terms of economic return. Also it can be said that inflation is negative to the return at the stock market, thus: the larger the inflation rate, the smaller the real return. It is shown that the market does not anticipate the future inflation, and of course it is not included in the actual price. Probabilities for selected real return values are presented. The probability to obtain a real return greater than 0% and other values (5%, 10%. 12% and 18%) as well, is much less than 50%. This might show that investing at the stock market is just gambling.

Suggested Citation

  • Ignacio Vélez Pareja, 1999. "The Colombian Stock Market: 1930-1998," Proyecciones Financieras y Valoración 3576, Master Consultores.
    • Handle: RePEc:col:000463:003576
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    Citations

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    Cited by:

    1. Hatemi-J, Abdulnasser & Sarmiento-Sabogal, Julio, 2013. "An Empirical Investigation of the Colombian Stock Market Reaction to the US Market: Evidence from a Casewise Bootstrap Approach - Un’analisi empirica della reazione del mercato azionario colombiano al," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 66(1), pages 57-67.

    More about this item

    Keywords

    Stocks; stock markets; inflation; Colombia; Colombian stock market; financial history; real returns on stocks; nominal returns on stocks; non-measurable returns; Colombian firms; CAPM; risk free rate of return; risk premium.;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean

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