NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Volatility in an Era of Reduced Uncertainty: Lessons from Pax Britannica

William O. Brown, Richard C. K. Burdekin, Marc D. Weidenmier

NBER Working Paper No. 11319
Issued in May 2005
NBER Program(s):   AP   DAE

Although it has been well established that financial volatility is related to news and macroeconomic shocks, there has been less emphasis on the importance of underlying economic and political stability. In this paper we study the behavior of consol returns since 1729 and identify a greater-than-50% decline in volatility from the end of the Napoleonic wars in 1815 until the First World War. News events and macroeconomic variables cannot account for this extended period of reduced volatility. Underlying political stability under Pax Britannica seems to be a more likely explanation, however.

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Document Object Identifier (DOI): 10.3386/w11319

Published: Brown, William O., Jr., Richard C. K. Burdekin and Marc D. Weidenmier. "Volatility In An Era Of Reduced Uncertainty: Lessons From Pax Britannica," Journal of Financial Economics, 2006, v79(3,Mar), 693-707. citation courtesy of

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