How Important was Silver? Some Evidence on Exchange Rate Fluctuations and Stock Returns in Colonial-Era Asia
The World Bank Office in Bangkok
February 25, 2002
Cornell University Johnson Graduate School of Management Working Paper
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
Date posted: March 16, 2002
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