Abstract

http://ssrn.com/abstract=739585
 
 

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Advance Contracts for the Sale of Wool in Medieval England: An Undeveloped and Inefficient Market?


Adrian R. Bell


University of Reading - ICMA Centre

Chris Brooks


University of Reading - ICMA Centre

Paul R. Dryburgh


King's College London

April 2005

ISMA Centre Discussion Paper in Finance No. 05-01

Abstract:     
While it is commonly believed that derivative instruments are a recent invention, we document the existence of forward contracts for the sale of wool in medieval England around 700 years ago. The contracts were generally entered into by English monasteries, who frequently sold their wool for up to twenty years in advance to mostly foreign and particularly Italian merchants. Employing a unique source of data collected by hand from the historical records, we determine the interest rates implied in these transactions and we also examine the efficiency of the forward and spot markets. The calculated interest rates average around 20%, in accordance with available information concerning the interest rates used in other types of transactions at that time. Perhaps surprisingly, we also find little evidence of informational inefficiencies in these markets.

Number of Pages in PDF File: 33

Keywords: Wool market, forward contracts, market efficiency, Medieval England, interest rates

JEL Classification: G13, N13, N53

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Date posted: June 9, 2005  

Suggested Citation

Bell, Adrian R. and Brooks, Chris and Dryburgh, Paul R., Advance Contracts for the Sale of Wool in Medieval England: An Undeveloped and Inefficient Market? (April 2005). ISMA Centre Discussion Paper in Finance No. 05-01. Available at SSRN: http://ssrn.com/abstract=739585 or http://dx.doi.org/10.2139/ssrn.739585

Contact Information

Adrian R. Bell
University of Reading - ICMA Centre ( email )
Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
Chris Brooks (Contact Author)
University of Reading - ICMA Centre ( email )
Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 118 931 82 39 (Phone)
+44 118 931 47 41 (Fax)
Paul R. Dryburgh
King's College London ( email )
Strand
London, UT England WC2R 2LS
United Kingdom
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