Published online by Cambridge University Press: 03 March 2009
This paper attempts to shed new light on the proximate determinants of domestic investment in Victorian Britain by focusing on the relationship between asset markets and investment behavior. It demonstrates that Victorian investment fluctuations were associated with divergences between the valuation of installed capital as determined in asset markets and the supply price of new capital as determined in commodity markets. After showing how investment fluctuations in Victorian Britain were related to real equity prices, the paper concludes with a summary of findings on the determinants of real share prices.
1 See for example Cairncross, A. K., Home and Foreign Investment, 1870–1913 (Cambridge, 1953), pp. 187–209;Google ScholarRostow, W. W., British Economy of the Nineteenth Century (Oxford, 1949), pp. 58–89.Google Scholar
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4 Maximizing with respect to L yields a second first-order condition: w = pyfL.Google Scholar
5 More precisely, for average and marginal q's to be equal, debt/equity ratios must be constant and production and installation functions must be linear homogenous.Google Scholar
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7 Omitting G and K-1 has little effect on the estimated coefficients of q.Google Scholar
8 This is a brief summary of Section V of the author's discussion paper.Google Scholar
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