How Important was Silver? Some Evidence on Exchange Rate Fluctuations and Stock Returns in Colonial-Era Asia

Cornell University Johnson Graduate School of Management Working Paper

42 Pages Posted: 16 Mar 2002  

Warren Bailey

Cornell University

Kirida Bhaopichitr

The World Bank Office in Bangkok

Multiple version iconThere are 2 versions of this paper

Date Written: February 25, 2002

Abstract

We study the impact of silver price changes on stock returns from seven small open economies that switched between silver, gold, and paper money standards at different times between 1873 and 1939. Silver exposure is a priced factor in monthly equity returns. Silver price changes forecast realized monthly equity risk premiums, suggesting that expected risk premiums varied with the price of silver. Silver price changes forecast annual indicators of trade flows, global business cycles, and inflation. The evidence suggests how corporate profits and stock market risk premiums are linked to exchange rates, trade, economic activity, and inflation.

Keywords: Exchange rates, exchange rate exposures, equity market risk premiums

JEL Classification: F31, G12, G15

Suggested Citation

Bailey, Warren and Bhaopichitr, Kirida, How Important was Silver? Some Evidence on Exchange Rate Fluctuations and Stock Returns in Colonial-Era Asia (February 25, 2002). Cornell University Johnson Graduate School of Management Working Paper. Available at SSRN: https://ssrn.com/abstract=303160 or http://dx.doi.org/10.2139/ssrn.303160

Warren B. Bailey (Contact Author)

Cornell University ( email )

Samuel CurtisJohnson Graduate School of Management
387 Sage Hall
Ithaca, NY 14853-6201
United States
607-255-4627 (Phone)
607-254-4590 (Fax)

HOME PAGE: http://courses.cit.cornell.edu/wbb1/

Kirida Bhaopichitr

The World Bank Office in Bangkok ( email )

93/1 Wireless Road
Diethelm Towers, Tower A, 14th Floor
Bangkok, 10330
Thailand

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