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Financial Diversification before WW1 : A Risk/Return Analysis of Portfolio’s Advice of French Financial Analyst Alfred Neymarck

Author

Listed:
  • Cécile EDLINGER
  • Maxime MERLI

    (LaRGE Research Center, Université de Strasbourg)

  • Antoine PARENT
Abstract
In this paper, we propose an original analysis of advice given by financial analysts prior to WW1. Our paper focuses on the writings of A. Neymarck, one of the most popular French analysts in the early 20th Century. The creation of portfolios from a new database composed of the monthly returns of all the security types listed on the Paris Stock Exchange from 1903 to 1912 has provided results demonstrating that Neymarck correctly identified the risk in various sectors. The performances of the portfolios built according to Neymarck’s guidelines reveal the ranking announced by the analyst, both in terms of risk and in terms of return: the richer the investor, the riskier and the more profitable his portfolio was seen to be. Finally, the construction of optimal portfolios according to the Modern Portfolio Theory enables us to pinpoint the few imperfections of Neymarck’s advice, which nevertheless appears to be driven by solid financial analysis.

Suggested Citation

  • Cécile EDLINGER & Maxime MERLI & Antoine PARENT, 2018. "Financial Diversification before WW1 : A Risk/Return Analysis of Portfolio’s Advice of French Financial Analyst Alfred Neymarck," Working Papers of LaRGE Research Center 2018-03, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2018-03
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    File URL: http://ifs.u-strasbg.fr/large/publications/2018/2018-03.pdf
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    References listed on IDEAS

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    1. Fishlow, Albert, 1985. "Lessons from the past: capital markets during the 19th century and the interwar period," International Organization, Cambridge University Press, vol. 39(3), pages 383-439, July.
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    Cited by:

    1. HANNAH, Leslie, 2018. "Corporate Governance, Accounting Transparency and Stock Exchange Sizes in Germany, Japan and “Anglo-Saxon” Economies, 1870-1950," Discussion paper series HIAS-E-77, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.

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    More about this item

    Keywords

    Portfolio advice; Efficiency; Financial Markets prior to WW1;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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