The Belle-Epoque of Portfolios? How Returns, Risk, and Diversification Correlated with the Wealth Distribution in Paris in 1912

Thomas Pastore

The Journal of Economic History, 2024, vol. 84, issue 3, 767-806

Abstract: I reconstruct the historical performance of individual portfolios owned by Parisian investors during the French Belle-Epoque, which was characterized by a massive concentration of wealth. Using the value of inherited bequests as a proxy for ex ante wealth, I show that wealthier investors not only exhibited greater betas and thus benefited from the bull market, but also captured positive alphas, which translated into greater Sharpe ratios. Their performance was enhanced by diversification tilted toward equity and foreign assets. I identify heterogeneity in returns as a significant driver of the rise of wealth inequalities during the Belle-Epoque.

Date: 2024
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