Testing Asset Pricing Theory on Six Hundred Years of Stock Returns: Prices and Dividends for the Bazacle Company from 1372 to 1946

52 Pages Posted: 29 May 2014 Last revised: 12 Feb 2016

David Le Bris

Toulouse Business School

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Sebastien Pouget

Toulouse School of Economics

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Date Written: February 12, 2016

Abstract

We test asset pricing theory using the Bazacle company of Toulouse, the earliest documented shareholding corporation. We collect share prices and net dividends from its foundation in 1372 to its nationalization in 1946. We find a real average dividend yield of 5% per annum and no long-term price growth. Stationary dividends and stock prices enable us to directly study how prices relate to expected cash flows, without relying on rates of return. An asset pricing model with persistent dividends and a time-varying risk correction is not rejected by the data. Moreover, variations in expected future dividends explain between one-sixth and one-third of variations in prices. Finally, we find a downward-sloping term structure of the risk premium.

Keywords: asset pricing, history of finance, consumption risk

JEL Classification: G12, N13, N23

Suggested Citation

Le Bris, David and Goetzmann, William N. and Pouget, Sebastien, Testing Asset Pricing Theory on Six Hundred Years of Stock Returns: Prices and Dividends for the Bazacle Company from 1372 to 1946 (February 12, 2016). Paris December 2014 Finance Meeting EUROFIDAI - AFFI Paper. Available at SSRN: https://ssrn.com/abstract=2443044 or http://dx.doi.org/10.2139/ssrn.2443044

David Le Bris

Toulouse Business School ( email )

20, bd Lascrosses
Toulouse, 31068
France

William N. Goetzmann (Contact Author)

Yale School of Management - International Center for Finance ( email )

165 Whitney Ave.
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-436-9252 (Fax)

HOME PAGE: http://viking.som.yale.edu

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sebastien Pouget

Toulouse School of Economics ( email )

21 allée de Brienne
31015 Toulouse Cedex 6
France

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