Investor Behaviour in a Nascent Capital Market: Scottish Bank Shareholders in the Nineteenth Century

26 Pages Posted: 5 Jan 2011

See all articles by Graeme Acheson

Graeme Acheson

University of Stirling

John D. Turner

Queen's University Belfast; Queen's University Belfast - Queen's Management School

Abstract

This article uses the records of nineteenth-century Scottish banks in an attempt to understand investor behaviour in the early British capital market. It presents four main findings, some of which do not conform to the basic assumptions of standard asset pricing theories. First, in an era when efficient portfolio diversification was not possible, the intrinsic risk of an equity security was an important input into investor decision-making. Second, our evidence suggests that businesspeople initially regarded bank stock as a consumption good, as being a stockholder gave them privileged access to bank finance. When bank lending practices changed in the middle of the century, this access-to-credit advantage associated with owning bank stock largely disappeared. Third, investors typically exhibited a bias towards banks that conducted business in the areas where they resided. Fourth, a sizeable proportion of investors were stockholders in more than one bank.

Suggested Citation

Acheson, Graeme and Turner, John D., Investor Behaviour in a Nascent Capital Market: Scottish Bank Shareholders in the Nineteenth Century. The Economic History Review, Vol. 64, No. 1, pp. 188-213, 2011, Available at SSRN: https://ssrn.com/abstract=1735244 or http://dx.doi.org/10.1111/j.1468-0289.2010.00524.x

Graeme Acheson

University of Stirling ( email )

Stirling, Scotland FK9 4LA
United Kingdom

John D. Turner (Contact Author)

Queen's University Belfast ( email )

David Leir Building
Belfast BT7 1NN, BT9 5AG
Ireland

Queen's University Belfast - Queen's Management School

Riddel Hall
185 Stranmillis Road
Belfast, BT9 5EE
United Kingdom

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