Investor behaviour in a nascent capital market: Scottish bank shareholders in the nineteenth century

Graeme G. Acheson, John D. Turner

Research output: Contribution to journalArticle

13 Citations (Scopus)

Abstract

This article uses the records of nineteenth‐century Scottish banks in an attempt to understand investor behaviour in the early British capital market. It presents four main findings, some of which do not conform to the basic assumptions of standard asset pricing theories. First, in an era when efficient portfolio diversification was not possible, the intrinsic risk of an equity security was an important input into investor decision‐making. Second, our evidence suggests that businesspeople initially regarded bank stock as a consumption good, as being a stockholder gave them privileged access to bank finance. When bank lending practices changed in the middle of the century, this access‐to‐credit advantage associated with owning bank stock largely disappeared. Third, investors typically exhibited a bias towards banks that conducted business in the areas where they resided. Fourth, a sizeable proportion of investors were stockholders in more than one bank.
Original languageEnglish
Pages (from-to)188-213
Number of pages26
JournalEconomic History Review
Volume64
Issue number1
Early online date4 Jan 2011
DOIs
Publication statusPublished - 28 Feb 2011

Keywords

  • Scotland
  • banks
  • bank lending practices
  • nineteenth century

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