Share Portfolios and Risk Management in the Early Years of Financial Capitalism: London 1690-1730
The dramatic expansion of public and private financial markets in the aftermath of the Glorious Revolution has received extensive attention. Despite interest in the operation of the capital market, much less is known about how ordinary individual investors managed risk within this framework. Using a newly constructed data set of share ownership for each company listed in the financial press of the day, we reconstruct individual portfolio holdings for every investor in these companies. We examine individual portfolio holdings first for the decade after the Glorious Revolution and then for the years around the South Sea Bubble of 1720. We also examine holdings over time. Despite a fivefold increase in the number of unique individuals in the market between the 1690s and the 1720s, we find that in each period roughly eighty per cent of those active in the equity market owned shares in only one company, even though most shareholders had the capacity or wealth to diversity their share portfolios. We also find some continuity in the market with forty per cent of those who owned stock in 1690 holding stock two decades later. This level of stock market activity suggests that individuals were diversifying against idiosyncratic liquidity risk. Overall, however, there is limited evidence that individuals were using their financial portfolios to increase return or reduce risk or to protect themselves against diversifiable shocks. Clearly some part of this behaviour can be explained by low levels of financial literacy, for many, however, company specific voting rules with their attendant effects on firm governance drove market activity.
|Date of creation:||Sep 2012|
|Contact details of provider:|| Postal: 2-1 Naka, Kunitachi, Tokyo 186-8603|
Web page: http://cei.ier.hit-u.ac.jp/
More information through EDIRC
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.:
- Grassby,Richard, 1995. "The Business Community of Seventeenth-Century England," Cambridge Books, Cambridge University Press, number 9780521434508.
- Paul Harrison, 2001. "Rational Equity Valuation at the Time of the South Sea Bubble," History of Political Economy, Duke University Press, vol. 33(2), pages 269-281, Summer.
- Lindert, Peter H., 1980. "English Occupations, 1670–1811," The Journal of Economic History, Cambridge University Press, vol. 40(04), pages 685-712, December.
- Lusardi, Annamaria & Mitchell, Olivia S., 2011.
"Financial literacy around the world: an overview,"
Journal of Pension Economics and Finance,
Cambridge University Press, vol. 10(04), pages 497-508, October.
- Annamaria Lusardi & Olivia S. Mitchell, 2011. "Financial Literacy Around the World: An Overview," CeRP Working Papers 106, Center for Research on Pensions and Welfare Policies, Turin (Italy).
- Annamaria Lusardi & Olivia S. Mitchell, 2011. "Financial Literacy around the World: An Overview," NBER Working Papers 17107, National Bureau of Economic Research, Inc.
- Lindert, Peter H, 1986. "Unequal English Wealth since 1670," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1127-1162, December.
- Luigi Guiso & Tullio Jappelli, 2008. "Financial Literacy and Portfolio Diversification," EIEF Working Papers Series 0812, Einaudi Institute for Economics and Finance (EIEF), revised Oct 2008.
- Luigi Guiso & Tullio Jappelli, 2008. "Financial Literacy and Portfolio Diversification," Economics Working Papers ECO2008/31, European University Institute.
- Luigi Guiso & Tullio Jappelli, 2009. "Financial Literacy and Portfolio Diversification," CSEF Working Papers 212, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Natasha Glaisyer, 2007. "Calculating credibility: print culture, trust and economic figures in early eighteenth-century England -super-1," Economic History Review, Economic History Society, vol. 60(4), pages 685-711, November.
- Carlos, Ann M. & Key, Jennifer & Dupree, Jill L., 1998. "Learning and the Creation of Stock-Market Institutions: Evidence from the Royal African and Hudson's Bay Companies, 1670–1700," The Journal of Economic History, Cambridge University Press, vol. 58(02), pages 318-344, June.
- Neal, Larry & Quinn, Stephen, 2001. "Networks of information, markets, and institutions in the rise of London as a financial centre, 1660 1720," Financial History Review, Cambridge University Press, vol. 8(01), pages 7-26, April.
- Carlos, Ann M. & Neal, Larry, 2011. "Amsterdam and London as financial centers in the eighteenth century," Financial History Review, Cambridge University Press, vol. 18(01), pages 21-46, April.
- Ann M. Carlos & Larry Neal, 2011. "Amsterdam and London as financial centers in the eighteenth century," LSE Research Online Documents on Economics 38799, London School of Economics and Political Science, LSE Library.
- Carlos, Ann M. & Neal, Larry, 2004. "Women investors in early capital markets, 1720 1725," Financial History Review, Cambridge University Press, vol. 11(02), pages 197-224, October.
- Quinn, Stephen, 2001. "The Glorious Revolution'S Effect On English Private Finance: A Microhistory, 1680 1705," The Journal of Economic History, Cambridge University Press, vol. 61(03), pages 593-615, September.
- Paul Harrison, 2004. "What Can We Learn for Today from 300-Year-Old Writings about Stock Markets?," History of Political Economy, Duke University Press, vol. 36(4), pages 667-688, Winter.
- Carlos, Ann M. & Moyen, Nathalie & Hill, Jonathan, 2002. "Royal African Company Share Prices during the South Sea Bubble," Explorations in Economic History, Elsevier, vol. 39(1), pages 61-87, January. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:hit:hitcei:2012-12. 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: (Reiko Suzuki)
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.