TY - JOUR
T1 - Economically irrational pricing of nineteenth-century British government bonds
AU - Odlyzko, Andrew
N1 - Publisher Copyright:
Copyright © European Association for Banking and Financial History e.V. 2017.
Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.
PY - 2016/12/1
Y1 - 2016/12/1
N2 - British government bonds formed the deepest, most liquid and most transparent financial market of the nineteenth century. This article shows that those bonds had long periods, extending over decades, of anomalous behavior, in which Consols, the largest and best known of these instruments, were noticeably overpriced relative to equivalent securities which offered the same interest rate and the same guarantee of payment. This finding and similar ones for other comparable pairs of British gilts appear to provide the most extreme counterexamples documented so far to the Efficient Markets Hypothesis and to the Law of One Price, and point the way to further investigations on the origins and nature of the modern economy.
AB - British government bonds formed the deepest, most liquid and most transparent financial market of the nineteenth century. This article shows that those bonds had long periods, extending over decades, of anomalous behavior, in which Consols, the largest and best known of these instruments, were noticeably overpriced relative to equivalent securities which offered the same interest rate and the same guarantee of payment. This finding and similar ones for other comparable pairs of British gilts appear to provide the most extreme counterexamples documented so far to the Efficient Markets Hypothesis and to the Law of One Price, and point the way to further investigations on the origins and nature of the modern economy.
KW - Law of One Price Counterexamples
KW - Pricing anomalies
KW - Violations of Efficient Markets Hypothesis
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U2 - 10.1017/S0968565016000172
DO - 10.1017/S0968565016000172
M3 - Article
AN - SCOPUS:85008625928
VL - 23
SP - 277
EP - 302
JO - Financial History Review
JF - Financial History Review
SN - 0968-5650
IS - 3
ER -