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How Important was Silver? Some Evidence on Exchange Rate Fluctuations and Stock Returns in Colonial-Era AsiaWarren BaileyCornell University Kirida BhaopichitrThe World Bank Office in Bangkok February 25, 2002 Cornell University Johnson Graduate School of Management Working Paper Abstract: We study the impact of silver price changes on stock returns from seven small open economies that switched between silver, gold, and paper money standards at different times between 1873 and 1939. Silver exposure is a priced factor in monthly equity returns. Silver price changes forecast realized monthly equity risk premiums, suggesting that expected risk premiums varied with the price of silver. Silver price changes forecast annual indicators of trade flows, global business cycles, and inflation. The evidence suggests how corporate profits and stock market risk premiums are linked to exchange rates, trade, economic activity, and inflation.
Number of Pages in PDF File: 42 Keywords: Exchange rates, exchange rate exposures, equity market risk premiums JEL Classification: F31, G12, G15 working papers seriesDate posted: March 16, 2002Suggested CitationContact Information
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