The present value relation over six centuries: The case of the Bazacle company☆

Abstract

We study asset pricing over the longue durée using share prices and net dividends from the Bazacle company of Toulouse, the earliest documented shareholding corporation. The data extend from the firm’s foundation in 1372 to its nationalization in 1946. We find an average dividend yield of 5% per annum and near-zero long-term, real capital appreciation. Stationary dividends and stock prices enable us to directly study how prices relate to expected cash flows, without relying on a rate of return transformation. A reduced-form asset pricing model with persistent dividends and a time-varying risk correction is not rejected by the data.

Keywords

Asset pricing
History of finance
Present value tests

JEL classification

G12
N23
☆

We would like to thank Vikas Agarwal, Bruno Biais, Chloé Bonnet, Claude Denjean, René Garcia, José Miguel Gaspar, Alex Guembel, Pierre-Cyrille Hautcœur, Christian Julliard, Augustin Landier, Laurence Lescourret, Junye Li, Patrice Poncet, Jean-Laurent Rosenthal, Steve Ross, Sandrine Victor, Maxime Wavasseur and especially Marianne Andries, Ralph Koijen and Nour Meddahi, as well as seminar and conference participants at the Toulouse School of Economics, the Canadian Institute for Advanced Research–Instittute for Advanced Studies in Toulouse (CIFAR–IAST) conference, University of California at Irvine, HEC Paris, ESSEC Business School, Georgia State University, Casa de Velazquez-Madrid, and the American Economic Association meeting 2016 for helpful comments and suggestions. We also wish to thank Geneviève Douillard and Daniel Rigaud, from the Archives Départementales de la Haute-Garonne, for their help in finding and reading original documents.

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