The Colombian Stock Market: 1930-1998

Ignacio Velez-Pareja ()

No 3576, Proyecciones Financieras y Valoración from Master Consultores

Abstract: This article explores the behavior of the stock market in Colombia with the information given by the Bolsa de Bogota Index (Indice de la Bolsa de Bogota, IBB). The index is analyzed from January, 1930 to December, 1998. The inflation rate covers the same period; the inflation rate as measured by the Consumer Price Index. This exploratory paper does not intend to present conclusive remarks: in fact, there more questions than answers. They are just ideas to work on. The trends of this analysis show that monthly and per annum return -nominal and real- are well below from the expected return of any financial investor. A first hypothesis to explain this is that the investor and entrepreneurs receive benefits that are non- measurable in terms of economic return. Also it can be said that inflation is negative to the return at the stock market, thus: the larger the inflation rate, the smaller the real return. It is shown that the market does not anticipate the future inflation, and of course it is not included in the actual price. Probabilities for selected real return values are presented. The probability to obtain a real return greater than 0% and other values (5%, 10%. 12% and 18%) as well, is much less than 50%. This might show that investing at the stock market is just gambling.

Keywords: Stocks; stock markets; inflation; Colombia; Colombian stock market; financial history; real returns on stocks; nominal returns on stocks; non-measurable returns; Colombian firms; CAPM; risk free rate of return; risk premium. (search for similar items in EconPapers)
JEL-codes: E22 E44 G11 G12 G14 G31 M21 N16 (search for similar items in EconPapers)
Pages: 21
Date: 1999-01-28
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:col:000463:003576

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