New Bank and Transportation Stock Indexes from 1793 to 1871, with Comparisons Across Region and Sector, and Against Prior Indexes

139 Pages Posted: 12 Nov 2019

See all articles by Edward F. McQuarrie

Edward F. McQuarrie

Santa Clara University - Leavey School of Business

Date Written: November 4, 2019

Abstract

Good data on US stock market returns before the advent of the Cowles’ (1939) dataset in 1871 have been scarce. Small samples and an inability to observe dividends render current estimates suspect. I report total return for a much larger sample of stocks before 1871 than heretofore seen. I observe prices and dividends for all the large banks trading in the markets of Boston, Philadelphia, Baltimore and Virginia, where past research had been confined mostly to banks headquartered in New York. I also observe prices and dividends for all the large turnpikes, canals, and railroads that traded in this period. In both cases I find significant survivorship bias in prior compilations. Banks that went bust or went to the wall in the Panics of 1819 and 1837 have been ignored. Early transportation firms that soared on speculation and then collapsed without ever paying a dividend have also been omitted from the record. Likewise, the dividend cuts and omissions characteristic of hard times have been overlooked. Net of correcting these survivorship biases, in the period before the Civil War I find significantly lower stock market returns than reported in Siegel (2014). I likewise find bonds out-performing stocks during this period. The paper concludes with a discussion of why stocks should have performed poorly, and bonds well, under the distinctive macroeconomic conditions that prevailed before the Civil War.

Keywords: historical stock returns, banks, railroads, canals, turnpikes, panic of 1819, panic of 1837, panic of 1857

JEL Classification: E32, E44, G01, G21, G22, N11, N21, N71

Suggested Citation

McQuarrie, Edward F., New Bank and Transportation Stock Indexes from 1793 to 1871, with Comparisons Across Region and Sector, and Against Prior Indexes (November 4, 2019). Available at SSRN: https://ssrn.com/abstract=3480838 or http://dx.doi.org/10.2139/ssrn.3480838

Edward F. McQuarrie (Contact Author)

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

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