Attitudes to investment risk amongst West Midland canal and railway company investors, 1760-1850

Abstract

Attitudes to environmental and investment risk are examined to determine whether they were a defining characteristic of middle-class behaviour in the period 1760 to 1850. Approximately 6,000 investors in eleven canal companies and seven railway companies were investigated to determine whether evaluation and mitigation of investment risk is determined by socio-economic background and gender. Investment risk was defined as inadequate access to, and imperfect interpretation of, information. The effectiveness of information transfer through public and private spheres was examined and the effect of differential access to these information conduits, as a consequence of gender or socio-economic background, was investigated. Investors' response to the risk environment of early death, war and unpredictable economic cycles was examined. Each canal company and the group of railway companies was ranked according to the level of investment risk during both the construction and operating period, using a mix of quantitative and qualitative tests. The risk preferences of 'economic' and 'financial' investors were compared. The strategies used by each group of investor to mitigate risk were examined. The study provides new evidence of the effective transmission of national market sentiment by the 1770s, but reveals that the physical market in canal company shares remained local and continued its separate existence long after the institutionalised national market for railway shares was established. Perceptible differences in the risk assessment and risk mitigation strategies of different groups of investors were observed. This was attributed to differential access to information, which in turn was attributed to gender and social, political and religious affiliation. The study provides evidence that although differences in behaviour were observed amongst groups within the sample population, it shared common investment strategies and that attitudes to risk and risk mitigation should be considered as valid criteria for class differentiation