PDF Financial Market History

FINANCIAL MARKET HISTORY

REFLECTIONS ON THE PAST FOR INVESTORS TODAY

Edited by David Chambers and Elroy Dimson

FINANCIAL MARKET HISTORY

REFLECTIONS ON THE PAST FOR INVESTORS TODAY

Edited by David Chambers and Elroy Dimson

Statement of Purpose

The CFA Institute Research Foundation is a not-for-profit organization established to promote the development and dissemination of relevant research for investment practitioners worldwide.

Neither the Research Foundation, CFA Institute, nor the publication's editorial staff is responsible for facts and opinions presented in this publication. This publication reflects the views of the author(s) and does not represent the official views of the CFA Institute Research Foundation.

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? 2016 The CFA Institute Research Foundation. All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the copyright holder.

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Cover Image Photo Credit: bunhill/Getty Images

ISBN 978-1-944960-13-1

December 2016

Editorial Staff

Abby Farson Pratt Assistant Editor

Julia Mackesson, PMP Manager, Publishing, Standards and Advocacy

Anh Pham Publishing Technology Specialist

Biographies

Olivier Accominotti is associate professor of economic history at the London School of Economics and Political Science and an affiliate at the Centre for Economic Policy Research. He is a specialist in international financial history and has published extensively in this area. Professor Accominotti is also a member of the editorial board of Financial History Review, and his current projects focus on currency markets and the international propagation of financial crises. He holds a PhD in economics from Sciences Po Paris and has held postdoctoral or visiting positions at Princeton University; the University of California, Berkeley; the European University Institute; and the Bank of France.

Jan Annaert is professor of finance at the University of Antwerp and at the Antwerp Management School. He is chairman of the Study Centre on Stock Exchanges and Enterprises (SCOB), the university's research center for financial history. Professor Annaert also serves as independent director on the board of mutual funds and is an external member of the Pricing and Valuation Committee of KBC Asset Management. His teaching and research interests include portfolio theory, asset pricing, financial risk management, and financial history. Professor Annaert has published his research in a variety of publications, including Cliometrica, Explorations in Economic History, Financial History Review, the Journal of Banking and Finance, and the Journal of International Money and Finance.

Stephen J. Brown joined Monash Business School as professor of finance in January 2016, transitioning to emeritus status at New York University (NYU) Stern School of Business. Before joining NYU in 1986, Professor Brown worked at Bell Telephone Laboratories, where he spent time as district manager at AT&T Pension Fund, as well as at Yale University. He has published widely in a range of high-quality journals and is the author of five books. Professor Brown has recently been appointed executive editor of the Financial Analysts Journal?. He graduated from Monash University in 1971 and earned an MBA and a PhD from the University of Chicago in 1976.

Frans Buelens is senior researcher at the Study Centre on Stock Exchanges and Enterprises (SCOB) at the University of Antwerp. He is responsible for supervising the work on the digitization of the Brussels and Antwerp Stock Exchanges. Dr. Buelens is the author (and coauthor) of several books, including Congo 1885?1960 and Beurzen van Belgi?: een geschiedenis van het beurswezen, 1801?1867 (Stock Exchanges of Belgium: A History of Stock Exchange Life). He has published in Economic History Review, Explorations in

? 2016 CFA Institute Research Foundation. All rights reserved.

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Financial Market History

Economic History, the Journal of European Economic History, Financial History Review, Cliometrics, and other journals.

Carsten Burhop is professor of economic and social history at the University of Vienna and a research affiliate at the Max Planck Institute for Research on Collective Goods in Bonn, Germany. His research focuses on many aspects of economic and business history, including the history of stock markets, financial institutions, corporate governance, and the management of innovation. Professor Burhop has published in the Journal of Economic History, Business History Review, European Review of Economic History, German Economic Review, and Schmalenbach Business Review.

David Chambers is a reader in finance, a Keynes Fellow, and academic director of the Centre for Endowment Asset Management at Cambridge Judge Business School. His research interests span asset management and financial history, and he has published in the Journal of Finance, the Journal of Financial and Quantitative Analysis, the Journal of Economic Perspectives, the Journal of Economic History, Economic History Review, Explorations in Economic History, the Financial Analysts Journal, and the Journal of Portfolio Management. Prior to returning to full-time education in 2001, Dr. Chambers worked for 20 years in investment banking and asset management at Barings, Hotchkis & Wiley, and Merrill Lynch. He sits on the editorial board of the Financial Analysts Journal.

Elroy Dimson is chairman of the Centre for Endowment Asset Management at Cambridge Judge Business School, emeritus professor of finance at London Business School, and adviser to the board of FTSE International. He previously served London Business School in a variety of senior positions and the Norwegian Government Pension Fund Global as chairman of the Strategy Council. Dr. Dimson is coauthor of Triumph of the Optimists and has published in a number of journals, including the Journal of Finance, the Journal of Financial Economics, the Review of Financial Studies, the Journal of Business, the Journal of Portfolio Management, and the Financial Analysts Journal, where he serves as a member of the Advisory Council.

Barry Eichengreen is George C. Pardee and Helen N. Pardee Professor of Economics at the University of California, Berkeley, a research associate of the National Bureau of Economic Research, and a research fellow of the Centre for Economic Policy Research. He is a fellow of the American Academy of Arts and Sciences and a member of the Council on Foreign Relations.

Caroline Fohlin is a professor of economics at Emory University. She has published extensively on the history of financial markets, institutions, and systems, including two monographs: Finance Capitalism and Germany's Rise

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? 2016 CFA Institute Research Foundation. All rights reserved.

Biographies

to Industrial Power and Mobilizing Money: How the World's Richest Nations Financed Industrial Growth. Professor Fohlin has recently completed the first comprehensive high-frequency transaction and quote database for the NYSE for the period 1900?1925. She holds the position of Distinguished Visiting Professor, Economics, at Emory University. Professor Fohlin holds a BS in mathematics and quantitative economics from Tufts University and a PhD in economics from the University of California, Berkeley.

William N. Goetzmann is the Edwin J. Beinecke Professor of Finance and Management Studies at Yale School of Management. His research topics include asset pricing, the equity risk premium, arbitrage strategies, selecting investment managers, global investing, and financial history. Professor Goetzmann's work has been featured in most of the major financial news publications and his academic research has been published in all of the major academic finance journals. His current work focuses on endowments, financial history, operational risk, securitization, credit risk, and behavioral finance. Professor Goetzmann is the director of the International Center for Finance at the Yale School of Management, where he has been since 1994. Previously, he taught investments and real estate at Columbia Business School.

Charles Goodhart, CBE, FBA, is emeritus professor of banking and finance with the Financial Markets Group at the London School of Economics (LSE), having previously been its deputy director. Until his retirement in 2002, he had served as the Norman Sosnow Professor of Banking and Finance at LSE since 1985. Dr. Goodhart also worked at the Bank of England for 17 years as a monetary adviser, becoming a chief adviser in 1980. In 1997, he was appointed one of the outside independent members of the Bank of England's new Monetary Policy Committee. Dr. Goodhart also taught at Cambridge University.

Leslie Hannah is visiting professor of economic history at the London School of Economics. He lives in Tokyo and specializes in global corporate and financial history of the 20th century. Professor Hannah also is a visiting professor at Cardiff Business School and formerly served as pro-director of the London School of Economics.

Antti Ilmanen is a principal at AQR Capital Management, where he heads the Portfolio Solutions Group. Before AQR, he spent seven years at Brevan Howard, a macro hedge fund, and a decade at Salomon Brothers/ Citigroup. Dr. Ilmanen has advised many institutional investors, including Norway's Government Pension Fund Global. He has published a book, Expected Returns, as well as numerous articles in finance/investment journals and has received the Graham and Dodd Award from the Financial Analysts

? 2016 CFA Institute Research Foundation. All rights reserved.

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Financial Market History

Journal and the Bernstein Fabozzi/Jacobs Levy awards. Dr. Ilmanen holds two MSc degrees from the University of Helsinki and a PhD in finance from the University of Chicago.

Paul Marsh is emeritus professor of finance at London Business School, where he previously served as chair of the finance department, deputy principal, faculty dean, and elected governor and dean of the finance programs. He has advised on several public enquiries, was chairman of Aberforth Smaller Companies Trust and a nonexecutive director of M&G Group and Majedie Investments, and has acted as a consultant to a wide range of financial institutions and companies. Dr. Marsh is coauthor of Triumph of the Optimists and has published articles in the Journal of Business, the Journal of Finance, the Journal of Financial Economics, the Journal of Portfolio Management, Harvard Business Review, and other journals. With Elroy Dimson, he co-designed the FTSE 100-Share Index and the Numis Smaller Companies Index, produced since 1987 at London Business School.

Larry Neal is emeritus professor of economics at the University of Illinois at Urbana?Champaign, a research associate at the National Bureau of Economic Research, and a fellow of the Cliometric Society. He is coeditor of the two-volume Cambridge History of Capitalism and The History of Financial Crises. Professor Neal's books include The Rise of Financial Capitalism: International Capital Markets in the Age of Reason, "I Am Not Master of Events": The Speculations of John Law and Lord Londonderry in the Mississippi and South Sea Bubbles, and A Concise History of International Finance: From Babylon to Bernanke.

Tom Nicholas is the William J. Abernathy Professor of Business Administration in the Entrepreneurial Management Group at Harvard Business School. His research focuses on the history of the venture capital industry, entrepreneurship and wealth accumulation, intellectual property rights, and the foundations of new technology formation, especially in relation to the financing of innovation. Professor Nicholas holds a doctorate in economic history from Oxford University.

Angelo Riva teaches finance at the European Business School, where he is dean of research and director of the finance research department. He is also an affiliate researcher at the Paris School of Economics. Dr. Riva is the scientific manager of the "Data for Financial History" project and the principal investigator of the projects "Systemic Risk in the 1930s" and "Parisian Financiers' Belle Epoque (1871?1913): Space, Organizations and Social Structure." His research focuses on European monetary and financial history. Dr. Riva has published in the Journal of Monetary Economics, the Economic History Review, and Explorations in Economic History, among others.

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? 2016 CFA Institute Research Foundation. All rights reserved.

Biographies

K. Geert Rouwenhorst is the Robert B. and Candice J. Haas Professor of Corporate Finance at the Yale School of Management. He has held visiting positions at MIT and the International Monetary Fund. Professor Rouwenhorst's research interests include the empirical trade-off between risk and return in financial markets, hedge fund strategies, commodity markets, and the history of finance. His articles have been published in academic as well as in applied journals. His book The Origins of Value: The Financial Innovations That Created Modern Capital Markets surveys key historical innovations in the field of finance. Professor Rouwenhorst holds a PhD from the University of Rochester.

Janette Rutterford is a professor of financial management and research professor of the True Potential Centre for the Public Understanding of Finance at the Open University Business School. Professor Rutterford also worked at Credit Lyonnais as a gilts analyst, taught finance at the London School of Economics, and worked in corporate finance at N.M. Rothschild & Sons Limited.

Christophe Spaenjers is an associate professor at HEC Paris. His research interests include alternative investments, investor behavior, household finance, and financial history. Professor Spaenjers has published in a number of journals, including the Journal of Financial Economics, American Economic Review (Papers and Proceedings), Management Science, and the Financial Analysts Journal. He teaches in the MBA program at HEC Paris. Professor Spaenjers holds a PhD from Tilburg University.

Mike Staunton is director of the London Share Price Database, a research resource of London Business School, where he produces the London Business School Risk Measurement Service. He has taught at universities in the United Kingdom, Hong Kong, and Switzerland. Dr. Staunton is coauthor of Advanced Modelling in Finance Using Excel and VBA and writes a regular column for Wilmott magazine. He is coauthor of Triumph of the Optimists and has published in the Journal of Banking & Finance, the Financial Analysts Journal, the Journal of the Operations Research Society, and Quantitative Finance.

Eugene N. White is distinguished professor of economics at Rutgers University and a research associate at the National Bureau of Economic Research. His current research focuses on bank supervision, the 1920s housing market boom, stock market booms and crashes, and the management of financial crises in Great Britain, France, and the United States. Professor White has written more than 50 scholarly articles. He was recently a member of the advisory council for the Federal Reserve Centennial, the Houblon-Norman fellow at the Bank of England, and a visiting professor at the ?cole des hautes ?tudes en sciences sociales.

? 2016 CFA Institute Research Foundation. All rights reserved.

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