How Important Was Silver? Some Evidence on Exchange Rate Fluctuations and Stock Returns in Colonial-Era Asia

Warren Bailey and Kirida Bhaopichitr
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Warren Bailey: Cornell University
Kirida Bhaopichitr: World Bank OfficeBangkok

The Journal of Business, 2004, vol. 77, issue 1, 137-174

Abstract: We study the impact of silver price changes on stock returns from seven small open economies that switched among silver, gold, and paper money standards at different times between 1873 and 1939. Silver exposure is a priced factor in monthly equity returns. Changes in silver prices forecast realized monthly equity risk premiums, suggesting that expected risk premiums varied with the price of silver. Changes in silver prices forecast annual indicators of trade flows, global business cycles, and inflation. The evidence suggests how corporate profits and stock market risk premiums are linked to exchange rates, trade, economic activity, and inflation.

Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:77:y:2004:i:1:p:137-174

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