The character and denomination of shares in the Victorian equity market

Graeme Acheson

    Research output: Contribution to journalArticle

    17 Citations (Scopus)

    Abstract

    The seminal work of J. B. Jefferys highlighted two unusual features of the Victorian equity market, namely high share denomination and uncalled capital. This article examines the extent to which publicly traded company stocks in the nineteenth century had these features. It also analyses the effect of these features on stock returns using monthly data for the London Stock Market over the period 1825–70. We find that stocks with unpaid capital earned a higher return, which is consistent with investors being rewarded for the risk of a call on their personal assets. We also find that stocks with a high share denomination earned a lower return, which is consistent with the view that this feature was conducive to superior corporate governance.
    LanguageEnglish
    Pages862-886
    JournalEconomic History Review
    Volume65
    Issue number3
    DOIs
    Publication statusPublished - 1 Aug 2012

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    Denomination
    Equity
    Victorian Era
    Equity markets
    Investors
    Corporate Governance
    Stock Market
    Corporate governance
    Stock returns
    Assets
    Stock market

    Cite this

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    title = "The character and denomination of shares in the Victorian equity market",
    abstract = "The seminal work of J. B. Jefferys highlighted two unusual features of the Victorian equity market, namely high share denomination and uncalled capital. This article examines the extent to which publicly traded company stocks in the nineteenth century had these features. It also analyses the effect of these features on stock returns using monthly data for the London Stock Market over the period 1825–70. We find that stocks with unpaid capital earned a higher return, which is consistent with investors being rewarded for the risk of a call on their personal assets. We also find that stocks with a high share denomination earned a lower return, which is consistent with the view that this feature was conducive to superior corporate governance.",
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    note = "Reference text: Acheson, G. G., Hickson, C. R., Turner, J. D., and Ye, Q., ‘Rule Britannia!: British stock market returns, 1825–1870’, Journal of Economic History, 69 (2009), pp. 1107–37. CrossRef,Web of Science{\circledR} Times Cited: 4Acheson, G. G. and Turner, J. D., ‘The secondary market for bank shares in nineteenth-century Britain’, Financial History Review, 15 (2008), pp. 123–51. CrossRefBartlett, T., A treatise on British mining (1850). Bekaert, G., Harvey, C. R., and Lundblad, C. T., ‘Liquidity and expected returns: lessons from emerging markets’, Review of Financial Studies, 20 (2007), pp. 1783–831. CrossRef,Web of Science{\circledR} Times Cited: 57Billings, M. and Capie, F., ‘Capital in British banking, 1920–1970’, Business History, 49 (2007), pp. 139–62. CrossRef,Web of Science{\circledR} Times Cited: 1Burke, G. and Richardson, P., ‘The decline and fall of the cost book system in the Cornish tin mining industry, 1895–1914’, Business History, 23 (1981), pp. 4–18. CrossRef,Web of Science{\circledR} Times Cited: 8Burt, R. and Kudo, N., ‘The adaptability of the Cornish cost book system’, Business History, 25 (1983), pp. 30–41. CrossRef,Web of Science{\circledR} Times Cited: 8Campbell, G. and Turner, J. D., ‘Substitutes for legal protection: corporate governance and dividends in Victorian Britain’, Economic History Review, 64 (2011), pp. 571–97. Cooke, C. A., Corporation trust and company: an essay in legal history (Manchester, 1950). Copeland, T. E., ‘Liquidity changes following stock splits’, Journal of Finance, XXXIV (1979), pp. 115–41. Davis, J. S., Essays in the earlier history of American corporations, IV (Cambridge, Mass., 1917). Dimson, E., Nagel, S., and Quigley, G., ‘Capturing the value premium in the United Kingdom’, Financial Analysts Journal, 59, 6 (2003), pp. 35–45. CrossRef,Web of Science{\circledR} Times Cited: 27Edelstein, M., Overseas investment in the age of high imperialism: the United Kingdom, 1850–1914 (1982). Falkus, M. E., ‘The British gas industry before 1850’, Economic History Review, 2nd ser., XX (1967), pp. 494–508. Fama, E. F. and French, K. R., ‘The cross-section of expected stock returns’, Journal of Finance, XLVII (1992), pp. 427–65. Fama, E. F. and French, K. R., ‘Value versus growth: the international evidence’, Journal of Finance, LIII (1998), pp. 1975–99. Direct Link:AbstractPDF(121K) Fama, E. F. and French, K. R., ‘Dissecting anomalies’, Journal of Finance, LXIII (2008), pp. 1653–78. Direct Link:AbstractFull Article (HTML)PDF(146K)References Fama, E. F. and MacBeth, J. D., ‘Risk, return, and equilibrium: empirical tests’, Journal of Political Economy, 81 (1973), pp. 607–36. CrossRef,Web of Science{\circledR} Times Cited: 1420Fohlin, C., Finance capitalism and Germany's rise to industrial power (Cambridge, 2007). CrossRefFrancis, J., A history of the English railway: its social relations and revelations 1820–1845, 2 vols. (Newton Abbott, 1851). Freedeman, C. E., Joint-stock enterprise in France 1807–1867: from privileged company to modern corporation (Chapel Hill, NC, 1979). Grossman, P. Z., ‘The market for shares of companies with unlimited liability: the case of American Express’, Journal of Legal Studies, XXIV (1995), pp. 63–85. CrossRef,Web of Science{\circledR} Times Cited: 12Grossman, R. S., ‘New indices of British equity prices, 1870–1913’, Journal of Economic History, 62 (2002), pp. 121–46. Web of Science{\circledR} Times Cited: 14Grossman, R. S. and Shore, S. H., ‘The cross section of stock returns before World War I’, Journal of Financial and Quantitative Analysis, 41 (2006), pp. 271–94. CrossRef,Web of Science{\circledR} Times Cited: 1Han, K. C., ‘The effects of reverse splits on the liquidity of the stock’, Journal of Financial and Quantitative Analysis, 30 (1995), pp. 159–69. CrossRef,Web of Science{\circledR} Times Cited: 8Harris, R., Industrializing English law: entrepreneurship and business organization, 1720–1844 (Cambridge, 2000). CrossRefHeaton, J. and Lucas, D., ‘The importance of investor heterogeneity and financial market imperfections for the behavior of asset prices’, Carnegie-Rochester Conference Series on Public Policy, 42 (1995), pp. 1–32. CrossRefHeaton, J. and Lucas, D., ‘Stock prices and fundamentals’, NBER Macroeconomics Annual, 14 (1999), pp. 213–42. CrossRef,Web of Science{\circledR} Times Cited: 3Hickson, C. R. and Turner, J. D., ‘The Trading of unlimited liability bank shares in nineteenth-century Ireland: the Bagehot hypothesis’, Journal of Economic History, 63 (2003), pp. 931–58. CrossRef,Web of Science{\circledR} Times Cited: 12Jefferys, J. B., ‘The denomination and character of shares, 1855–1885’, Economic History Review, 2nd ser., XVI (1946), pp. 45–55. Jefferys, J. B., Business organisation in Great Britain 1856–1914 (New York, 1977). Kennedy, W. P., Industrial structure, capital markets and the origins of British economic decline (Cambridge, 1987). Kocherlakota, N. R., ‘The equity premium: it's still a puzzle’, Journal of Economic Literature, XXXIV (1996), pp. 42–71. Lindert, P. H., ‘Unequal English wealth since 1670’, Journal of Political Economy, 94 (1986), pp. 1127–62. CrossRef,Web of Science{\circledR} Times Cited: 35McCloskey, D. N., ‘Did Victorian Britain fail?’, Economic History Review, 2nd ser., XXIII (1970), pp. 446–59. Macgillivray, E. J. and Browne, D., Macgillivray on insurance law (1937). Martel, Y. B. and Marco, P. N., ‘The accounting mirror of the banking business: the Bank of Barcelona (1845–1856)’, Spanish Journal of Accounting History, 7 (2007), pp. 3–37. Michie, R. C., Money, mania and markets: investment, company formation and the stock exchange in nineteenth-century Scotland (Edinburgh, 1981). Michie, R. C., ‘The finance of innovation in late Victorian and Edwardian Britain’, Journal of European Economic History, 17 (1988), pp. 491–530. Michie, R. C., The London Stock Exchange: a history (Oxford, 1999). Pearson, R., Insuring the industrial revolution: fire insurance in Great Britain, 1700–1850 (Aldershot, 2004). Pitts, M. V., ‘Victorian share-pricing—a problem in thin trading’, Accounting, Business and Financial History, 8 (1998), pp. 33–52. CrossRefPolsi, A., ‘Financial institutions in nineteenth-century Italy. The rise of a banking system’, Financial History Review, 3 (1996), pp. 117–37. CrossRefRaynes, H. E., A history of British insurance (1948). Roll, R., ‘A critique of the asset pricing theory's tests: on past and potential testability of the theory’, Journal of Financial Economics, 4 (1977), pp. 129–76. CrossRef,Web of Science{\circledR} Times Cited: 671Rousseau, P. L., ‘Share liquidity, participation, and growth of the Boston market for industrial securities, 1854–1897’, Explorations in Economic History, 46 (2009), pp. 203–19. CrossRef,Web of Science{\circledR} Times Cited: 4Shannon, H. A., ‘The coming of general limited liability’, Economic History, 2 (1931), pp. 267–91. Stephens, C. H., The law and practise of joint stock companies under the Canadian acts (Toronto, 1881). Supple, B., The Royal Exchange Assurance: a history of British insurance 1720–1970 (Cambridge, 1970). Taylor, J., Creating capitalism: joint-stock enterprise in British politics and culture, 1800–1870 (2006). Ward, J. R., The finance of canal building in eighteenth-century England (Oxford, 1974). Weld, W. C., Michaely, R., Thaler, R. H., and Benartzi, S., ‘The nominal share price puzzle’, Journal of Economic Perspectives, 23, 2 (2009), pp. 121–42. CrossRef,Web of Science{\circledR} Times Cited: 2Williamson, J. G., ‘Earnings inequality in nineteenth-century Britain’, Journal of Economic History, XL (1980), pp. 457–75. CrossRef",
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    The character and denomination of shares in the Victorian equity market. / Acheson, Graeme.

    In: Economic History Review, Vol. 65, No. 3, 01.08.2012, p. 862-886.

    Research output: Contribution to journalArticle

    TY - JOUR

    T1 - The character and denomination of shares in the Victorian equity market

    AU - Acheson, Graeme

    N1 - Reference text: Acheson, G. G., Hickson, C. R., Turner, J. D., and Ye, Q., ‘Rule Britannia!: British stock market returns, 1825–1870’, Journal of Economic History, 69 (2009), pp. 1107–37. CrossRef,Web of Science® Times Cited: 4Acheson, G. G. and Turner, J. D., ‘The secondary market for bank shares in nineteenth-century Britain’, Financial History Review, 15 (2008), pp. 123–51. CrossRefBartlett, T., A treatise on British mining (1850). Bekaert, G., Harvey, C. R., and Lundblad, C. T., ‘Liquidity and expected returns: lessons from emerging markets’, Review of Financial Studies, 20 (2007), pp. 1783–831. CrossRef,Web of Science® Times Cited: 57Billings, M. and Capie, F., ‘Capital in British banking, 1920–1970’, Business History, 49 (2007), pp. 139–62. CrossRef,Web of Science® Times Cited: 1Burke, G. and Richardson, P., ‘The decline and fall of the cost book system in the Cornish tin mining industry, 1895–1914’, Business History, 23 (1981), pp. 4–18. CrossRef,Web of Science® Times Cited: 8Burt, R. and Kudo, N., ‘The adaptability of the Cornish cost book system’, Business History, 25 (1983), pp. 30–41. CrossRef,Web of Science® Times Cited: 8Campbell, G. and Turner, J. D., ‘Substitutes for legal protection: corporate governance and dividends in Victorian Britain’, Economic History Review, 64 (2011), pp. 571–97. Cooke, C. A., Corporation trust and company: an essay in legal history (Manchester, 1950). Copeland, T. E., ‘Liquidity changes following stock splits’, Journal of Finance, XXXIV (1979), pp. 115–41. Davis, J. S., Essays in the earlier history of American corporations, IV (Cambridge, Mass., 1917). Dimson, E., Nagel, S., and Quigley, G., ‘Capturing the value premium in the United Kingdom’, Financial Analysts Journal, 59, 6 (2003), pp. 35–45. CrossRef,Web of Science® Times Cited: 27Edelstein, M., Overseas investment in the age of high imperialism: the United Kingdom, 1850–1914 (1982). Falkus, M. E., ‘The British gas industry before 1850’, Economic History Review, 2nd ser., XX (1967), pp. 494–508. Fama, E. F. and French, K. R., ‘The cross-section of expected stock returns’, Journal of Finance, XLVII (1992), pp. 427–65. Fama, E. F. and French, K. R., ‘Value versus growth: the international evidence’, Journal of Finance, LIII (1998), pp. 1975–99. Direct Link:AbstractPDF(121K) Fama, E. F. and French, K. R., ‘Dissecting anomalies’, Journal of Finance, LXIII (2008), pp. 1653–78. Direct Link:AbstractFull Article (HTML)PDF(146K)References Fama, E. F. and MacBeth, J. D., ‘Risk, return, and equilibrium: empirical tests’, Journal of Political Economy, 81 (1973), pp. 607–36. CrossRef,Web of Science® Times Cited: 1420Fohlin, C., Finance capitalism and Germany's rise to industrial power (Cambridge, 2007). CrossRefFrancis, J., A history of the English railway: its social relations and revelations 1820–1845, 2 vols. (Newton Abbott, 1851). Freedeman, C. E., Joint-stock enterprise in France 1807–1867: from privileged company to modern corporation (Chapel Hill, NC, 1979). Grossman, P. Z., ‘The market for shares of companies with unlimited liability: the case of American Express’, Journal of Legal Studies, XXIV (1995), pp. 63–85. CrossRef,Web of Science® Times Cited: 12Grossman, R. S., ‘New indices of British equity prices, 1870–1913’, Journal of Economic History, 62 (2002), pp. 121–46. Web of Science® Times Cited: 14Grossman, R. S. and Shore, S. H., ‘The cross section of stock returns before World War I’, Journal of Financial and Quantitative Analysis, 41 (2006), pp. 271–94. CrossRef,Web of Science® Times Cited: 1Han, K. C., ‘The effects of reverse splits on the liquidity of the stock’, Journal of Financial and Quantitative Analysis, 30 (1995), pp. 159–69. CrossRef,Web of Science® Times Cited: 8Harris, R., Industrializing English law: entrepreneurship and business organization, 1720–1844 (Cambridge, 2000). CrossRefHeaton, J. and Lucas, D., ‘The importance of investor heterogeneity and financial market imperfections for the behavior of asset prices’, Carnegie-Rochester Conference Series on Public Policy, 42 (1995), pp. 1–32. CrossRefHeaton, J. and Lucas, D., ‘Stock prices and fundamentals’, NBER Macroeconomics Annual, 14 (1999), pp. 213–42. CrossRef,Web of Science® Times Cited: 3Hickson, C. R. and Turner, J. D., ‘The Trading of unlimited liability bank shares in nineteenth-century Ireland: the Bagehot hypothesis’, Journal of Economic History, 63 (2003), pp. 931–58. CrossRef,Web of Science® Times Cited: 12Jefferys, J. B., ‘The denomination and character of shares, 1855–1885’, Economic History Review, 2nd ser., XVI (1946), pp. 45–55. Jefferys, J. B., Business organisation in Great Britain 1856–1914 (New York, 1977). Kennedy, W. P., Industrial structure, capital markets and the origins of British economic decline (Cambridge, 1987). Kocherlakota, N. R., ‘The equity premium: it's still a puzzle’, Journal of Economic Literature, XXXIV (1996), pp. 42–71. Lindert, P. H., ‘Unequal English wealth since 1670’, Journal of Political Economy, 94 (1986), pp. 1127–62. CrossRef,Web of Science® Times Cited: 35McCloskey, D. N., ‘Did Victorian Britain fail?’, Economic History Review, 2nd ser., XXIII (1970), pp. 446–59. Macgillivray, E. J. and Browne, D., Macgillivray on insurance law (1937). Martel, Y. B. and Marco, P. N., ‘The accounting mirror of the banking business: the Bank of Barcelona (1845–1856)’, Spanish Journal of Accounting History, 7 (2007), pp. 3–37. Michie, R. C., Money, mania and markets: investment, company formation and the stock exchange in nineteenth-century Scotland (Edinburgh, 1981). Michie, R. C., ‘The finance of innovation in late Victorian and Edwardian Britain’, Journal of European Economic History, 17 (1988), pp. 491–530. Michie, R. C., The London Stock Exchange: a history (Oxford, 1999). Pearson, R., Insuring the industrial revolution: fire insurance in Great Britain, 1700–1850 (Aldershot, 2004). Pitts, M. V., ‘Victorian share-pricing—a problem in thin trading’, Accounting, Business and Financial History, 8 (1998), pp. 33–52. CrossRefPolsi, A., ‘Financial institutions in nineteenth-century Italy. The rise of a banking system’, Financial History Review, 3 (1996), pp. 117–37. CrossRefRaynes, H. E., A history of British insurance (1948). Roll, R., ‘A critique of the asset pricing theory's tests: on past and potential testability of the theory’, Journal of Financial Economics, 4 (1977), pp. 129–76. CrossRef,Web of Science® Times Cited: 671Rousseau, P. L., ‘Share liquidity, participation, and growth of the Boston market for industrial securities, 1854–1897’, Explorations in Economic History, 46 (2009), pp. 203–19. CrossRef,Web of Science® Times Cited: 4Shannon, H. A., ‘The coming of general limited liability’, Economic History, 2 (1931), pp. 267–91. Stephens, C. H., The law and practise of joint stock companies under the Canadian acts (Toronto, 1881). Supple, B., The Royal Exchange Assurance: a history of British insurance 1720–1970 (Cambridge, 1970). Taylor, J., Creating capitalism: joint-stock enterprise in British politics and culture, 1800–1870 (2006). Ward, J. R., The finance of canal building in eighteenth-century England (Oxford, 1974). Weld, W. C., Michaely, R., Thaler, R. H., and Benartzi, S., ‘The nominal share price puzzle’, Journal of Economic Perspectives, 23, 2 (2009), pp. 121–42. CrossRef,Web of Science® Times Cited: 2Williamson, J. G., ‘Earnings inequality in nineteenth-century Britain’, Journal of Economic History, XL (1980), pp. 457–75. CrossRef

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    Y1 - 2012/8/1

    N2 - The seminal work of J. B. Jefferys highlighted two unusual features of the Victorian equity market, namely high share denomination and uncalled capital. This article examines the extent to which publicly traded company stocks in the nineteenth century had these features. It also analyses the effect of these features on stock returns using monthly data for the London Stock Market over the period 1825–70. We find that stocks with unpaid capital earned a higher return, which is consistent with investors being rewarded for the risk of a call on their personal assets. We also find that stocks with a high share denomination earned a lower return, which is consistent with the view that this feature was conducive to superior corporate governance.

    AB - The seminal work of J. B. Jefferys highlighted two unusual features of the Victorian equity market, namely high share denomination and uncalled capital. This article examines the extent to which publicly traded company stocks in the nineteenth century had these features. It also analyses the effect of these features on stock returns using monthly data for the London Stock Market over the period 1825–70. We find that stocks with unpaid capital earned a higher return, which is consistent with investors being rewarded for the risk of a call on their personal assets. We also find that stocks with a high share denomination earned a lower return, which is consistent with the view that this feature was conducive to superior corporate governance.

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