Lessons for todays investors from financial market history

Alumni from LBS celebrate launch of new book on investment

Blamed by many for the 2008 financial crisis, structured finance is often thought of as a latter-day invention. In fact, these securities in “elemental form” first appeared more than 200 years ago in the Netherlands, according to the book compiled by two experts who graduated from London Business School.

Elroy Dimson, Emeritus Professor of Finance, London Business School (PhD, 1979), and David Chambers, an alumnus of the School (Sloan, 1992), have edited a new book, Financial Market History: Reflections on the Past for Investors Today, in which lessons for modern investors from the history of financial markets are considered.

“Since the 2008 financial crisis, there has been a resurgence of interest in economic and financial history among investment professionals,” Dr Chambers and Professor Dimson write in the preface to the book.

“One central theme is that the growth in meticulous scholarship by financial economists and historians has led to many more long-run data sets becoming available on a broader range of financial assets and countries,” Dr Chambers says.

“Practitioners need to resist the temptation simply to download any historic time-series when modelling risk and return, without thinking about the quality of the data and the care with which the series has been compiled,” Professor Dimson adds.

The book comprises four sections: historical risks and returns on various assets, the development of stock markets, bubbles and crises, and the role of innovation in financial markets

Financial Market History: Reflections on the Past for Investors Today is published by CFA Institute Research Foundation.