Volatility in an Era of Reduced Uncertainty: Lessons from Pax Britannica

30 Pages Posted: 10 Jun 2005

See all articles by William O. Brown

William O. Brown

University of North Carolina (UNC) at Greensboro

Richard C. K. Burdekin

Claremont McKenna College - Robert Day School of Economics and Finance

Marc Weidenmier

Claremont McKenna College - Robert Day School of Economics and Finance; National Bureau of Economic Research (NBER)

Date Written: May 2005

Abstract

Although it has been well established that financial volatility is related to news and macroeconomic shocks, there has been less emphasis on the importance of underlying economic and political stability. In this paper we study the behavior of consol returns since 1729 and identify a greater-than-50% decline in volatility from the end of the Napoleonic wars in 1815 until the First World War. News events and macroeconomic variables cannot account for this extended period of reduced volatility. Underlying political stability under Pax Britannica seems to be a more likely explanation, however.

Suggested Citation

Brown, William O. and Burdekin, Richard C. K. and Weidenmier, Marc D., Volatility in an Era of Reduced Uncertainty: Lessons from Pax Britannica (May 2005). NBER Working Paper No. w11319, Available at SSRN: https://ssrn.com/abstract=721106

William O. Brown

University of North Carolina (UNC) at Greensboro ( email )

Bryan School of Business
PO Box 26165
Greensboro, NC 274026165
United States
336-256-0110 (Phone)

Richard C. K. Burdekin

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth Street
Claremont, CA 91711
United States

Marc D. Weidenmier (Contact Author)

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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