Skip to main content
SpringerLink
Log in

Long-run stock returns: evidence from Belgium 1838–2010

  • Original Paper
  • Published:
Cliometrica Aims and scope Submit manuscript

Abstract

We investigate monthly returns of Belgian stocks listed on the Brussels stock exchange in the period 1838–2010. Our dataset is based on official quotation lists of the stock exchange, and it takes into account all common stocks that were ever listed on the stock exchange during the period considered. This allows us to investigate the performance of the market as a whole in a consistent way over the nineteenth and twentieth centuries. We find that stock returns strongly depend on dividend income. While real capital appreciation tends to be negative, the dividend yield is remarkably stable over time. Stocks were less risky in the nineteenth century than in the twentieth century. While the equity premium is overall positive, the reward for equity risk is very volatile over time. Even in the long-run equity investors frequently earned a negative return. There are no consistent differences between returns on small stocks and large stocks.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5

Similar content being viewed by others

Notes

  1. Annaert et al. (2011) consider the period 1833–2005 but they investigate a research question which is different from the ones addressed in this paper: Are blue chip stock market index good proxies for all-shares market indices?

  2. The figure includes all common stocks issued by Belgian firms with main activity in Belgium or abroad and Belgian colonial firms as defined by SCOB. It does not include stocks issued by foreign firms.

  3. The number (percentage) of stocks that was not “common” and thus excluded was 2 (5.13 %) in 1850, 29 (18.35 %) in 1875, 124 (27.87 %) in 1900, 260 (31.94 %) in 1925, 151 (23.85 %) in 1950, 40 (11.83 %) in 1975, and 5 (3.57 %) in 2000.

  4. Since the official price index is unreliable during World War II, for this period, we use a weighted average of the official price index (75 %) and a black market index (25 %) (source: National Bank of Belgium).

  5. Positive serial correlation may underestimate volatility. As stocks were less liquid in the nineteenth century, Fig. 3 reports robust estimates of volatility. These are consistent with the results reported in Table 1.

  6. Assuming a minus 100 % return for all these delistings decreases the geometric mean return by only 0.05 %. The real effect of delistings on stock returns is very likely to be even smaller, since not all delistings with unknown returns will have a minus 100 % return.

  7. All reported figures are geometric mean, annualized (historical) equity premiums.

  8. Another form of financial restriction occurred during WW II, when the German occupiers restricted the daily allowable increase in stock prices and limited the payment of dividends to six percent of equity. They also strongly favored investments in state bonds which helped them to finance the war. After the war, the freedom of dividend payments was re-installed and firms were allowed to pay the remaining amount of dividends that they were not able to pay during the war. The equity premium we find for the periods 1919–1939 and 1946–2010 (i.e., excluding WW II) in Table 3 suggest that these financial restrictions do not affect the overall risk premium much.

  9. At the end of 1955, colonial firms constituted 41.66 % of total market capitalization of Belgian firms listed on the Brussels Stock Exchange. By the end of 1959, the share of colonial firms in market capitalization had declined to 19.36 %.

  10. We used their lowest estimate for the equity premium from their Table 4.

  11. In addition, we have checked whether small stocks on the Brussels stock exchange are from different industries than large stocks. The only notable difference we find is that a smaller proportion of small stocks are financial stocks. This difference is substantial in the 19th century, but gradually decreases over time, becoming very small by the 1980s. Industry differences therefore do not seem to explain our findings on the size effect.

References

  • Acheson G, Hickson CR, Turner J, Ye Q (2009) Rule Britannia! British stock market returns, 1825–70. J Econ Hist 69:1106–1136

    Article  Google Scholar 

  • Annaert J, Mensah L (2014) Cross-sectional predictability of stock returns, evidence from the 19th century Brussels Stock Exchange (1873–1914). Explor Econ Hist (forthcoming)

  • Annaert J, Buelens F, Cuyvers L, De Ceuster M, Deloof M, De Schepper A (2011) Are blue chip stock market indices good for all-shares market indices? The case of the Brussels stock exchange 1833–2005. Financ Hist Rev 18:277–308

    Article  Google Scholar 

  • Annaert J, Buelens F, De Ceuster MJK (2012) New Belgian stock market returns: 1832–1914. Explor Econ Hist 49:189–204

    Article  Google Scholar 

  • Banz R (1981) The relationship between return and market value of common stocks. J Financ Econ 9:3–18

    Article  Google Scholar 

  • Baudhuin F (1958) Histoire Economique de la Belgique 1945–1956. Bruylant, Brussels

    Google Scholar 

  • Blake D, Lehmann B, Timmermann A (1999) Asset allocation dynamics and pension fund performance. J Bus 72:429–461

    Article  Google Scholar 

  • Bodie Z, Kane A, Marcus AJ (2011) Investments. McGraw-Hill/Irwin, New York

    Google Scholar 

  • Cameron RE (1967) Banking in the early stages of industrialization: a study in comparative economic history. Oxford University Press, Oxford

    Google Scholar 

  • Cassis Y (2006) Capitals of capital: a history of international financial centers 1780–2009. Cambridge University Press, Cambridge

    Book  Google Scholar 

  • Chlepner BS (1930) Le Marché Financier Belge Depuis 100 Ans. Librairies Falk, Brussels

    Google Scholar 

  • Chlepner BS (1943) Belgian banking and banking theory. The Brookings Institution, Washington

    Google Scholar 

  • Daems H (1978) The holding company and corporate control. Martinus Nijhoff, Leiden

    Book  Google Scholar 

  • Dimson E, Marsh P, Staunton M (2002) Triumph of the optimists: 101 years of Global investment returns. Princeton University Press, Princeton

    Google Scholar 

  • Dimson E, Marsh P, Staunton M (2004) Low-cap and low-rated companies. J Portfolio Manage 30:133–143

    Article  Google Scholar 

  • Durviaux R (1947) La banque mixte : origine et soutien de l’expansion économique de la Belgique. Etablissements Emile Bruylant, Brussels

    Google Scholar 

  • Goetzmann WN, Ibbotson RG, Peng L (2001) A new historical database for the NYSE 1815 to 1925: performance and predictability. J Financ Mark 4:1–32

    Article  Google Scholar 

  • Grossman RS (2002) New indices of British equity prices, 1870–1913. J Econ Hist 62:121–146

    Google Scholar 

  • Grossman RS, Shore SH (2006) The cross section of stock returns before World War I. J Financ Quant Anal 41:271–294

    Article  Google Scholar 

  • Homer S, Sylla R (1991) A history of interest rates. Rutgers University Press, London

    Google Scholar 

  • Janssens P, Verboven H, Tiberghien A (1990) Drie eeuwen Belgische belastingen: van contributies, controleurs en belastingsontvangers. Fiscale Hogeschool, Brussels

    Google Scholar 

  • Jorion P, Goetzmann WN (1999) Global stock markets in the twentieth century. J Financ 54:953–980

    Article  Google Scholar 

  • Kurgan-van Hentenryk G (1991) Finance and financiers in Belgium, 1880–1914. In: Cassis Y (ed) Finance and financiers in European history, 1880–1960. Cambridge University Press, Cambridge, pp 317–336

    Google Scholar 

  • Le Bris D (2012) La volatilité des actions françaises sur le long terme. Revue Economique 63:569–580

    Article  Google Scholar 

  • Le Bris D, Hautcœur PC (2010) A challenge to triumphant optimists? A new index for the Paris stock-exchange (1854–2007). Financ Hist Rev 17:141–183

    Article  Google Scholar 

  • Mehra R, Prescott EC (1985) The equity premium: a puzzle. J Monet Econ 15:145–161

    Article  Google Scholar 

  • Michotte F (1937) L’Évolution des Prix de Détail en Belgique de 1830 à 1913. Bulletin de l’Institut des Sciences Economiques 8:346–357

    Google Scholar 

  • Rajan RG, Zingales L (2003) The great reversals: the politics of financial development in the twentieth century. J Financ Econ 69:5–50

    Article  Google Scholar 

  • Reinhart C, Sbrancia MB (2011) The Liquidation of Government Debt, NBER Working Paper 16893

  • Sbrancia MB (2012) A study of debt and inflation during a period of financial repression. PhD Dissertation, University of Maryland

  • Schwert GW (2003) Anomalies and market efficiency. In: Constantinides G, Harris M, Stulz RM (eds) Handbook of the economics of finance. Elsevier, Amsterdam, pp 938–972

    Google Scholar 

  • Shumway T (1997) The delisting bias in CRSP data. J Financ 52:327–340

    Article  Google Scholar 

  • Shumway T, Warther VA (1999) The delisting bias in CRSP’s Nasdaq data and its implications for the size effect. J Financ 54:2361–2379

    Article  Google Scholar 

  • Siegel JJ (1992) The equity premium: stock and bond returns since 1802. Financ Anal J 48:28–38

    Article  Google Scholar 

  • Siegel JJ (1994) Stocks for the long run. Irwin, New York

    Google Scholar 

  • Van De Velde G (1943) Le rendement des placements (1865–1939). Société d’Etudes Morales, Sociales et Juridiques, Louvain

    Google Scholar 

  • Van Nieuwerburgh S, Buelens F, Cuyvers L (2006) Stock market development and economic growth in Belgium. Explor Econ Hist 43:13–38

    Article  Google Scholar 

  • Van Overfelt W, Annaert J, De Ceuster M, Deloof M (2009) Do universal banks create value? Universal bank affiliation and company performance in Belgium, 1905–1909. Explor Econ Hist 46:253–265

    Article  Google Scholar 

  • Vanheurck J (1954) Les Finances Publiques Pendant l’Occupation Allemande de 1940 a 1945. In: Institut Belge de Finances Publiques (ed) Histoire des Finances Publiques Volume 2. Bruylant, Brussels, pp 401–439

  • Ye Q, Turner JD (2009) The asset pricing anomalies in 19th century Britain. Queen’s University Belfast Working Paper

  • Ye Q, Turner JD (2010) Has the equity premium always been so high? Evidence from the UK, 1825–1913. Queen’s University Belfast Working Paper

Download references

Acknowledgments

We are grateful to Piet Sercu, Peter Temin, conference participants at the European Historical Economics Society conference in Dublin, the Financial History workshop in Rotterdam, the 3L Finance workshop in Brussels, and the Economic History Association meeting in Evanston as well as two anonymous referees for helpful comments and suggestions.

Author information

Authors and Affiliations

  1. Antwerp Management School, Antwerp, Belgium

    Jan Annaert & Marc Deloof

  2. University of Antwerp, Antwerp, Belgium

    Jan Annaert, Frans Buelens & Marc Deloof

  3. Department of Accounting and Finance, University of Antwerp, Prinsstraat 13, 2000, Antwerp, Belgium

    Marc Deloof

Authors
  1. Jan Annaert
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Frans Buelens
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Marc Deloof
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Marc Deloof.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Annaert, J., Buelens, F. & Deloof, M. Long-run stock returns: evidence from Belgium 1838–2010. Cliometrica 9, 77–95 (2015). https://doi.org/10.1007/s11698-014-0109-7

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11698-014-0109-7

Keywords

JEL Classification

Search

Navigation