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

49 Pages Posted: 11 Jun 2014  

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: June 2014

Abstract

We use the Bazacle company of Toulouse's unique historical experience as a laboratory to test asset pricing theory. The Bazacle company is the earliest documented shareholding corporation. Founded in 1372 and nationalized in 1946, it was a grain milling firm for most of its 600 year history. We collect share prices and dividends over its entire lifespan. The average dividend yield in real terms was slightly in excess of is 5% per annum, while the long-term price growth was near zero. The company's unique full-payout dividend policy allows us to estimate an asset pricing model with fundamentally persistent dividends and a time-varying risk correction. The model is not rejected by the data. Variations in expected future dividends are found to explain between one-sixth and one-third of variations in prices. Moreover, the risk correction is correlated with macroeconomic shocks, in particular with the volatility of grain prices.

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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 (June 2014). NBER Working Paper No. w20199. Available at SSRN: https://ssrn.com/abstract=2448904

David Le Bris (Contact Author)

Toulouse Business School ( email )

20, bd Lascrosses
Toulouse, 31068
France

William N. Goetzmann

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)

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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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