That's Where the Money Was: Foreign Bias and English Investment Abroad, 1866-1907

35 Pages Posted: 15 Jun 2009

See all articles by Benjamin Remy Chabot

Benjamin Remy Chabot

Federal Reserve Bank of Chicago

Christopher Johann Kurz

Board of Governors of the Federal Reserve System

Date Written: June 10, 2009

Abstract

Why did Victorian Britain invest so much capital abroad? We collect over 500,000 monthly returns of British and foreign securities trading in London and the United States between 1866 and 1907. These heretofore-unknown data allow us to better quantify the historical benefits of international diversification and revisit the question of whether British Victorian investor bias starved new domestic industries of capital. We find no evidence of bias. A British investor who increased his investment in new British industry at the expense of foreign diversification would have been worse off. The addition of foreign assets significantly expanded the mean-variance frontier and resulted in utility gains equivalent to a meaningful increase in lifetime consumption.

Keywords: capital markets, home bias, history, Victorian overseas investment

JEL Classification: E44, F22, G11, G15, N21, N23, O16

Suggested Citation

Chabot, Benjamin Remy and Kurz, Christopher Johann, That's Where the Money Was: Foreign Bias and English Investment Abroad, 1866-1907 (June 10, 2009). Yale Economics Department Working Paper No. 64, Yale University Economic Growth Center Discussion Paper No. 972, Available at SSRN: https://ssrn.com/abstract=1417563 or http://dx.doi.org/10.2139/ssrn.1417563

Benjamin Remy Chabot (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

Christopher Johann Kurz

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551

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