The Colombian Stock Market: 1930-1998 (El Mercado De Acciones En Colombia: 1930-1998)

24 Pages Posted: 13 Apr 2009

See all articles by Ignacio Velez-Pareja

Ignacio Velez-Pareja

Grupo Consultor CAV Capital Advisory & Valuation

Date Written: April 13, 2009


This article explores the behavior of the stock market in Colombia with the information given by the Bolsa de Bogotá Index (Indice de la Bolsa de Bogotá, IBB). The index is analyzed from January, 1930 to December, 1998. The inflation rate covers the same period; the inflation rate as measured by the Consumer Price Index. This exploratory paper does not intend to present conclusive remarks: in fact, there more questions than answers. They are just ideas to work on. The trends of this analysis show that monthly and per annum return - nominal and real - are well below from the expected return of any financial investor. A first hypothesis to explain this is that the investor and entrepreneurs receive benefits that are non measurable in terms of economic return. Also it can be said that inflation is negative to the return at the stock market, thus: the larger the inflation rate, the smaller the real return. It is shown that the market does not anticipate the future inflation, and of course it is not included in the actual price. Probabilities for selected real return values are presented. The probability to obtain a real return greater than 0% and other values (5%, 10%. 12% and 18%) as well, is much less than 50%. This might show that investing at the stock market is just gambling.

The translation of this article into Spanish has been made more than 10 years after it was written and on occasion of the actual financial crisis the world is living today. The original version was written in English while the author was teaching at Universidad Javeriana in Bogotá, Colombia in December, 1998.

Keywords: Stocks, stock markets, inflation, Colombia, Colombian stock market, financial history, real returns on stocks, nominal returns on stocks, non-measurable returns, Colombian firms, CAPM, risk free rate of return, risk premium

JEL Classification: E44, G10, G14, N26, O16

Suggested Citation

Velez-Pareja, Ignacio, The Colombian Stock Market: 1930-1998 (El Mercado De Acciones En Colombia: 1930-1998) (April 13, 2009). Available at SSRN: or

Ignacio Velez-Pareja (Contact Author)

Grupo Consultor CAV Capital Advisory & Valuation ( email )

Ave Miramar # 18-93 Apt 6A
+573112333074 (Phone)


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