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Taming the great depression: Keynes’s personal investments in the US stock market, 1931–1939

Author

Listed:
  • Carlo Cristiano

    (Università di Pisa)

  • Maria Cristina Marcuzzo

    (Università di Roma, La Sapienza)

  • Eleonora Sanfilippo

    (Università di Cassino e del Lazio Meridionale)

Abstract

While the recent literature has shown an increasing interest in Keynes’s investment activity, specific analysis of his own (rather than for King’s College) investments in US securities is still lacking. Keynes began to trade in the US stock market on a regular basis in late 1931, when it was still very hard to tell when full recovery could be expected. In 1930, he had publicly rebutted the view of his business partner Oswald Falk, whose advice to investors was to abandon British manufacture and buy American shares. Until 1933, Keynes’s outlook on the USA remained negative. Only in February 1934 did Keynes become optimistic about the USA on account of his growing confidence in the New Deal, which however was short-lived. In 1937 he was shaken by the US recession and disillusioned by Roosevelt’s fiscal policies and reforms. In this paper we first trace the evolution of Keynes’s opinions on the US economy and his “view” on the US stock market. There are direct references to Wall Street and specific examples relating to its working that are contained, in particular, in Chapter 12 of the General Theory. We then go on to follow the timeline of his investments by sectors, focusing on the companies that Keynes held onto for a longer period, looking for a pattern in his investment behaviour in the US market between 1931 and 1939, before the War changed the personal and institutional circumstances of his investment activity. We offer also a comparison of Keynes’s own portfolio with his investments on behalf of King’s (as reconstructed by Chambers and Kabiri, Bus Hist Rev 90(Summer):301–328, 2016) and conclude with an assessment of the influence of his theoretical approach on his investment activity.

Suggested Citation

  • Carlo Cristiano & Maria Cristina Marcuzzo & Eleonora Sanfilippo, 2018. "Taming the great depression: Keynes’s personal investments in the US stock market, 1931–1939," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(1), pages 13-40, April.
  • Handle: RePEc:spr:epolit:v:35:y:2018:i:1:d:10.1007_s40888-017-0081-3
    DOI: 10.1007/s40888-017-0081-3
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    References listed on IDEAS

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    1. Carlo Cristiano & Maria Cristina Marcuzzo, 2018. "John Maynard Keynes: the economist as investor," Review of Keynesian Economics, Edward Elgar Publishing, vol. 6(2), pages 266-281, April.
    2. Accominotti, Olivier & Chambers, David, 2016. "If You're So Smart: John Maynard Keynes and Currency Speculation in the Interwar Years," The Journal of Economic History, Cambridge University Press, vol. 76(2), pages 342-386, June.
    3. Maria Cristina Marcuzzo & Eleonora Sanfilippo, 2016. "Keynes and the interwar commodity option markets," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(1), pages 327-348.
    4. Eugene Kandel & Konstantin Kosenko & Randall Morck & Yishay Yafeh, 2013. "The Great Pyramids of America: A Revised History of US Business Groups, Corporate Ownership and Regulation, 1930-1950," NBER Working Papers 19691, National Bureau of Economic Research, Inc.
    5. Fantacci, Luca & Marcuzzo, Maria Cristina & Sanfilippo, Eleonora, 2010. "Speculation In Commodities: Keynes’ “Practical Acquaintance” With Futures Markets," Journal of the History of Economic Thought, Cambridge University Press, vol. 32(3), pages 397-418, September.
    6. Moggridge, D E, 1992. "The," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 207-209, Summer.
    7. David Chambers & Elroy Dimson, 2013. "Retrospectives: John Maynard Keynes, Investment Innovator," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 213-228, Summer.
    8. Chambers, David & Kabiri, Ali, 2016. "Keynes and Wall Street," Business History Review, Cambridge University Press, vol. 90(2), pages 301-328, July.
    9. Carlo Cristiano & Nerio Naldi, 2014. "Keynes's activity on the cotton market and the theory of the 'normal backwardation': 1921-1929," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 21(6), pages 1039-1059, December.
    10. Chambers, David & Dimson, Elroy & Foo, Justin, 2015. "Keynes the Stock Market Investor: A Quantitative Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 50(4), pages 843-868, August.
    11. J. E. Woods, 2013. "On Keynes as an investor," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 37(2), pages 423-442.
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    Cited by:

    1. Marcuzzo, Maria Cristina & Sanfilippo, Eleonora, 2022. "Keynes's personal investments in the London Stock Exchange and his views on the transformation of the British economy," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 512-526.
    2. Rivot, Sylvie, 2021. "Reading Keynes’s policy papers through the prism of his Treatise on Probability: information, expectations and revision of probabilities in economic policy," OSF Preprints s5qp9, Center for Open Science.
    3. Marcuzzo, Maria Cristina & Sanfilippo, Eleonora, 2024. "Why was Keynes keen to invest in American but not in British Investment Trusts?," SocArXiv gtre7, Center for Open Science.

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    More about this item

    Keywords

    Keynes; Investment; Equities; Wall Street; Financial markets;
    All these keywords.

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-

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