Volatility in an era of reduced uncertainty: Lessons from Pax Britannica

William O. Brown; Richard C. K. Burdekin; Marc Weidenmier

doi:10.1016/j.jfineco.2005.04.002

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Journal of Financial Economics Vol. 79 No. 3 2006

Volatility in an era of reduced uncertainty: Lessons from Pax Britannica

William O. Brown¹; Richard C. K. Burdekin¹; Marc Weidenmier^2,1

¹ Claremont McKenna College · ² National Bureau of Economic Research

Abstract

Although it has been well established that financial volatility is related to news and macroeconomic shocks, less emphasis has been placed on the importance of underlying economic and political stability. In this paper we study the behavior of consol returns since 1729 and identify a greater-than-50% decline in volatility from the end of the Napoleonic Wars in 1815 until the First World War. News events and macroeconomic variables cannot account for this extended period of reduced volatility. Underlying political stability under Pax Britannica seems to be a more likely explanation.

DOI: 10.1016/j.jfineco.2005.04.002
Volume: 79
Issue: 3
Pages: 693-707
Language: en
Sources: bibtex:phds-export.bib openalex crossref

Volatility in an era of reduced uncertainty: Lessons from Pax Britannica

Abstract

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