An Optimal World Portfolio on the Eve of World War I: Was There a Bias to Investing in the New World Rather Than in Europe?

Cécile Edlinger, Maxime Merli and Antoine Parent
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Cécile Edlinger: BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique

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Abstract: The geographical distributions of French and British foreign investment portfolios differ markedly before World War I. Did French portfolios favor European investments just as British portfolios favored "New World" assets? Should economic rationality have encouraged investors to invest widely in the "New World" rather than in Europe? Combining Modern Portfolio Theory and a new data set comprising assets listed on the Paris and London Stock Exchanges, we show that investing in the "New World" did not yield higher returns than investing in Europe. The "European preference" of the Paris Bourse and, by extension, of French investors was not inefficient.

Keywords: Foreign investments; International economic relations; Investment analysis; European investments (British; French); Stock exchanges; Portfolio management (Investments); Dedicated portfolio theory (search for similar items in EconPapers)
Date: 2013-06
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Citations: View citations in EconPapers (9)

Published in Journal of Economic History, 2013, 73 (02), pp.498-530. ⟨10.1017/S002205071300034X⟩

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Journal Article: An Optimal World Portfolio on the Eve of World War I: Was There a Bias to Investing in the New World Rather Than in Europe? (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01077390

DOI: 10.1017/S002205071300034X

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