Library Header Image
LSE Research Online LSE Library Services

The canton of Berne as an investor on the London capital market in the 18th century

Altorfer, Stefan (2004) The canton of Berne as an investor on the London capital market in the 18th century. Economic History Working Papers (85/04). Department of Economic History, London School of Economics and Political Science, London, UK.

Download (496kB) | Preview


This paper is a case study about investor behaviour of the government of Berne on capital markets in the 18th century, focussing mainly on London. Economic theory about principal-agent problems and portfolio administration will be used to analyse quantitative and qualitative data from government accounts and reports, as well as from the contemporary press. On the basis of this material, information about the decision-making process by one of the biggest investors in the London capital market of the 18th century can be analysed. With very fortunate public finances, Berne started to invest money abroad in 1710 for both political and economic reasons. When the loans to Britain and Holland were redeemed in 1719 and 1725 respectively, they were invested in shares of chartered companies on the London capital market. During the South Sea Bubble of 1720, the Canton had made enormous profits with an unintended bull strategy. These were lost soon afterwards through opportunistic behaviour of the government’s agents in London. As a reaction, financial intermediaries were excluded from the administration of the English funds until 1765. The more dramatic step, to withdraw completely from foreign capital markets, was not made, probably since the remaining capital was still worth more than the investment before the Bubble. Berne acted as a cautious investor on European capital markets, especially in London, where its assets were low-risk and low-yield securities. With a portfolio diversification through investment on the continent after 1732, it took slightly more risk, but still qualifies as a widow-and-orphan investor, for which getting constant dividend payment is more important that a speculative profit.

Item Type: Monograph (Working Paper)
Official URL:
Additional Information: © 2004 Stefan Altorfer
Divisions: Economic History
Subjects: H Social Sciences > HC Economic History and Conditions
D History General and Old World > D History (General) > D901 Europe (General)
H Social Sciences > HG Finance
D History General and Old World > D History (General) > D204 Modern History
D History General and Old World > DA Great Britain
Date Deposited: 29 Jan 2009 17:59
Last Modified: 11 Feb 2021 00:24

Actions (login required)

View Item View Item


Downloads per month over past year

View more statistics