Testing Asset Pricing Theory on Six Hundred Years of Stock Returns: Prices and Dividends for the Bazacle Company from 1372 to 1946
We use the Bazacle company of Toulouse's unique historical experience as a laboratory to test asset pricing theory. The Bazacle company is the earliest documented shareholding corporation. Founded in 1372 and nationalized in 1946, it was a grain milling firm for most of its 600 year history. We collect share prices and dividends over its entire lifespan. The average dividend yield in real terms was slightly in excess of is 5% per annum, while the long-term price growth was near zero.
The company's unique full-payout dividend policy allows us to estimate an asset pricing model with fundamentally persistent dividends and a time-varying risk correction. The model is not rejected by the data. Variations in expected future dividends are found to explain between one-sixth and one-third of variations in prices. Moreover, the risk correction is correlated with macroeconomic shocks, in particular with the volatility of grain prices.
We would like to thank Bruno Biais, Chloé Bonnet, Claude Denjean, René Garcia, José Miguel Gaspar, Alex Guembel, Pierre-Cyrille Hautcœur, Christian Julliard, Ralph Koijen, Augustin Landier, Laurence Lescourret, Junye Li, Patrice Poncet, Jean-Laurent Rosenthal, Sandrine Victor, Maxime Wavasseur and especially Marianne Andries and Nour Meddahi, as well as seminar and conference participants at the Toulouse School of Economics, the CIFAR-IAST conference, UC Irvine, HEC, ESSEC, and Casa de Velazquez - Madrid for helpful comments and suggestions. We also wish to thank Geneviéve Douillard and Daniel Rigaud, from the Archives Départementales de la Haute-Garonne, for her help in finding and reading original documents. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
William N. Goetzmann
I serve on the board of Sarah Lawrence College
During part of the period this was written I served on the board of Commonfund, a non-profit investment manager for universities and endowments.Sébastien Pouget
Sebastien Pouget is a research director at IDEI and is funded by the center for sustainable finance and responsible investments (Chaire FDIR).