Performativity and Financial Markets: Option Pricing in the Late 19th Century

The paper revisits the performativity thesis in economics stressing the plural character of knowledge, which includes not only scientific models but also every form of practical knowledge that systematizes the visible and the articulable experience of economic agents. To highlight the point, the paper examines the pricing of options in London in the late 19th century, long before the academic origin of modern option pricing models. The pamphlets of the time are valuable archives of existing option transactions performed on the basis of systematic practical techniques widely established among investors

Putting all their eggs in one basket? Portfolio diversification 1870 to 1902

There are a number of reasons why investor portfolio characteristics are of interest. First, there is limited evidence of what individual investors actually held in their portfolios in the past, including, for example, whether there were significant differences between male and female investors. Second, investors’ portfolio holdings are relevant to the debate on the ‘democratisation’ of investment and, third, the inform the debate on whether investors in the past made efforts to reduce portfolio risk through diversification, before the full ‘scientific’ approach of the early twentieth century and the Markowitz optimisation approach of the mid-twentieth century. This paper explores the portfolio choices made by a sample of 508 investors – 263 men and 245 women - between 1870 and 1902. There is evidence of diversification, with the average holding of the sample being 4.6 securities. There is also evidence of increasing levels of diversification over time, of international diversification, and greater diversification by wealthy men and women. Investors in the past clearly made efforts to reduce portfolio risk before Markowitz optimisation

The Rise of the Small Investor in the US and the UK, 1895 to 1970

The role of the small shareholder has been largely ignored in the literature, which has tended to concentrate on controlling shareholders and family ownership. And yet, focus on the importance of small shareholders can capture significant aspects of financial development, since the more 'confident' the minority shareholders, the easier will capital flow to firms. Pre 1970, debates and policy conflicts linked to stock exchange development concentrated on shareholder democracy and diffusion as key indicators. The number of shareholders relative to the population was seen as a critical factor in explaining not only structures in corporate finance but also political and economic preferences, market developments and overall economic development. This paper explores the so-called democratisation of investment and the factors behind it through the lens of trends in estimates of the UK and US shareholding populations between 1895 and 1970. It covers three key periods: before World War I, before and after the stock market crash of 1929, and post-World War II. It identifies three periods in the US when shareholder numbers were paramount: in the boom years of the 1920s, as part of the inquest into the 1929 Crash, and post-World War II in an attempt to boost stock market activity. In the UK, although some concern was expressed during the 1920s and 1930s at the passive nature of small investors, who held diversified portfolios with small amounts in each holding, it was the fear of nationalisation after World War II which led to more in-depth shareholder estimates

Rebalancing the Euro Area: The Costs of Internal Devaluation

This paper investigates the economic costs of rebalancing current account positions in the Euro area by means of internal devaluation. Internal devaluation relies on wage suppression the deficit countries. Based on an old Keynesian model we estimate a current account equation, a wage-Phillips curve and an Okun’s Law equation. All estimations are carried out for a panel of twelve Euro area members. From the estimation results we calculate the output costs of reducing current account deficits. Greece, Ireland, Italy, Portugal and Spain (GIIPS) had, on average, current account deficits of 8.4% of GDP in 2007. To eliminate these current account deficits, a reduction of GPD by some 47% would be necessary. In principle there are two ways that trade imbalances could be resolved: deflationary adjustment in the deficit countries or inflationary adjustment in the surplus countries. Presently, the burden of adjustment is exclusively on the deficit countries. Our results indicate that the economic costs of this adjustment to those countries are equivalent to the output loss of the Great Depression. An adjustment of the surplus countries would increase growth and it would come with higher inflation, but it would allow rebalancing without a Great Depression in parts of Europe

Rate controlling mechanisms in the extraction of zinc and copper with a supported liquid membrane.

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The Interest of Large-t Elastic Scattering

Existing data for large-$t$ $pp$ elastic-scattering differential cross-sections are energy-independent and behave as $t^{-8}$. This has been explained in terms of triple-gluon exchange, or alternatively through triple-singlet exchange. A discussion is given of the problems raised by each of these explanations, and of the possibility that at RHIC or LHC energies the exchange of three BFKL pomerons might result in a rapid rise with energy.Comment: 6 pages, plain tex, 3 figures embedded with eps