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Old volatility - ARCH effects in 19th century consol data

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  • Heather Mitchell
  • Rob Brown
  • Stephen Easton

Abstract

Engle's autoregressive conditional heteroscedasticity (ARCH) model has been used successfully to model volatility in modern financial data. Here the returns on 3% Consols traded on the London market from 1821 to 1860 are examined for timevarying conditional heteroscedasticity. The series contains over 10,000 daily price changes. The analysis produces strong evidence for persistent ARCH effects in the data. Structural changes in the model and periods of increased volatility can be linked to important political and historical events.

Suggested Citation

  • Heather Mitchell & Rob Brown & Stephen Easton, 2002. "Old volatility - ARCH effects in 19th century consol data," Applied Financial Economics, Taylor & Francis Journals, vol. 12(4), pages 301-307.
    • Handle: RePEc:taf:apfiec:v:12:y:2002:i:4:p:301-307
    DOI: 10.1080/09603100010005843
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    References listed on IDEAS

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    1. N. Gregory Mankiw & Lawrence H. Summers, 1984. "Do Long-Term Interest Rates Overreact to Short-Term Interest Rates?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(1), pages 223-248.
    2. Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 83-106, June.
    3. repec:bla:econom:v:56:y:1989:i:221:p:61-70 is not listed on IDEAS
    4. Lee, Tom K Y & Tse, Y K, 1991. "Term Structure of Interest Rates in the Singapore Asian Dollar Market," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(2), pages 143-152, April-Jun.
    5. repec:bla:ecorec:v:69:y:1993:i:205:p:163-78 is not listed on IDEAS
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    Cited by:

    1. Brown, William Jr. & Burdekin, Richard C.K. & Weidenmier, Marc D., 2006. "Volatility in an era of reduced uncertainty: Lessons from Pax Britannica," Journal of Financial Economics, Elsevier, vol. 79(3), pages 693-707, March.
    2. Booth, G. Geoffrey & Gurun, Umit G., 2008. "Volatility clustering and the bid-ask spread: Exchange rate behavior in early Renaissance Florence," Journal of Empirical Finance, Elsevier, vol. 15(1), pages 131-144, January.

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