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Pitfalls in the Estimation of the Yield on British Consols, 1850–1914

Published online by Cambridge University Press:  03 March 2009

Jan Tore Klovland
Jan Tore Klovland
Affiliation:
Professor of Economics at the Norwegian School of Economics and Business Administration, Helleveien 30, N-5035 Bergen-Sandviken, Norway.
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Abstract

Five pitfalls commonly encountered in estimating the yield on British Consols are identified and discussed herein. The most difficult question is whether Consol prices in the later 1890s reflected expectations of a conversion of the Consol stock in 1923. This is equivalent to asking whether security markets in the 1890s regarded the then extremely low interest rates to be a temporary or permanent phenomenon. Predictions from estimated equations for the yield spread between other high-class investments and Consols are used to determine this question. A corrected monthly series of the yield on Consols between 1850 and 1914 is presented.

Type
Articles
Information
The Journal of Economic History , Volume 54 , Issue 1 , March 1994 , pp. 164 - 187
Copyright
Copyright © The Economic History Association 1994

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