Novel market inefficiencies from early Victorian times

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

A previously unknown pricing anomaly existed for a few years in the late 1840s in the British government bond market, in which the larger and more liquid of two very large bonds was underpriced. None of the published mechanisms explains this phenomenon. It may be related to another pricing anomaly that existed for much of the nineteenth century in which terminable annuities were significantly underpriced relative to so-called 'perpetual' annuities that dominated the government bond market. The reasons for these mispricings seem to lie in the early Victorian culture, since the basic economic incentives as well as laws and institutions were essentially the familiar modern ones. This provides new perspectives on the origins and nature of modern corporate capitalism.

Original languageEnglish (US)
Pages (from-to)143-165
Number of pages23
JournalFinancial History Review
Volume24
Issue number2
DOIs
StatePublished - Aug 1 2017

Fingerprint

Annuities
Market inefficiency
Pricing
Bond market
Government bonds
Anomaly
Victorian Times
Economic law
Economic incentives
Capitalism
Mispricing
Economics
British Government
Government
1840s
Liquid
Incentives
Victorian Era

Keywords

  • Law of One Price counterexamples
  • pricing anomalies
  • violations of the Efficient Markets Hypothesis

Cite this

Novel market inefficiencies from early Victorian times. / Odlyzko, Andrew.

In: Financial History Review, Vol. 24, No. 2, 01.08.2017, p. 143-165.

Research output: Contribution to journalArticle

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