Risk and Return

  • Klas RönnbäckEmail author
  • Oskar Broberg
Part of the Palgrave Studies in Economic History book series (PEHS)


The aim of this chapter is to use the risk/return relationship to broaden the picture of the financial axis between the London financial market and Africa during our period of study. We use two central concepts in the analysis of financial risk—volatility and equity risk premium—to put our return estimates in context. We move on to analyse the relationship between the companies’ longevity in our sample and the return on investment. Our results show that investing in Africa was somewhat riskier than investing in the United Kingdom, which on an aggregate level corresponds with a somewhat elevated return on investment. Disaggregating the data by region in Africa at the same time shows that many investors were unable to receive a premium for the increased risk they faced.


  1. Agarwal, Rajshree, and Michael Gort. 2002. Firm and Product Life Cycles and Firm Survival. American Economic Review 92 (2): 184–190.CrossRefGoogle Scholar
  2. Box, Marcus. 2008. The Death of Firms: Exploring the Effects of Environment and Birth Cohort on Firm Survival in Sweden. Small Business Economics 31 (4): 379–393.CrossRefGoogle Scholar
  3. Buelens, Frans, and Stefaan Marysse. 2009. Returns on Investments during the Colonial Era: The Case of the Belgian Congo. The Economic History Review 62 (s1): 135–166.CrossRefGoogle Scholar
  4. Cain, Peter J., and Anthony G. Hopkins. 2001. British Imperialism, 1688–2000. Harlow: Longman.Google Scholar
  5. Casson, Mark, and Teresa da Silva Lopes. 2013. Foreign Direct Investment in High-Risk Environments: An Historical Perspective. Business History 55 (3): 375–404.CrossRefGoogle Scholar
  6. Chabot, Benjamin R., and Christopher J. Kurz. 2010. That’s Where the Money Was: Foreign Bias and English Investment Abroad, 1866–1907. The Economic Journal 120 (547): 1056–1079.CrossRefGoogle Scholar
  7. Dimson, Elroy, Paul Marsh, and Mike Staunton. 2002. Triumph of the Optimists: 101 Years of Global Investment Returns. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
  8. Edelstein, Michael. 1976. Realized Rates of Return on UK Home and Overseas Portfolio Investment in the Age of High Imperialism. Explorations in Economic History 13 (3): 283–329.CrossRefGoogle Scholar
  9. ———. 1994. Foreign Investment and Accumulation, 1860–1914. The Economic History of Britain Since 1700: 173–196.Google Scholar
  10. Ferguson, Niall, and Moritz Schularick. 2006. The Empire Effect: The Determinants of Country Risk in the First Age of Globalization, 1880–1913. The Journal of Economic History 66 (2): 283–312.CrossRefGoogle Scholar
  11. Gardner, Leigh. 2017. Colonialism or Supersanctions: Sovereignty and Debt in West Africa, 1871–1914. European Review of Economic History 21 (2): 236–257.CrossRefGoogle Scholar
  12. Goetzmann, William N., and Roger G. Ibbotson. 2005. History and the Equity Risk Premium. In Handbook of the Equity Risk Premium, ed. Rajnish Mehra, 515–529. Amsterdam: Elsevier.Google Scholar
  13. ———. 2006. The Equity Risk Premium: Essays and Explorations. New York: Oxford University Press.Google Scholar
  14. Grossman, Richard S. 2015. Bloody Foreigners! Overseas Equity on the London Stock Exchange, 1869–1929. The Economic History Review 68 (2): 471–521.CrossRefGoogle Scholar
  15. Michie, Ranald C. 2006. The Global Securities Market a History. Oxford: Oxford University Press.CrossRefGoogle Scholar
  16. Siegel, Jeremy J. 1992. The Equity Premium: Stock and Bond Returns since 1802. Financial Analysts Journal 48 (1): 28–38.CrossRefGoogle Scholar
  17. Van Helten, Jean-Jacques. 1990. Mining, Share Manias and Speculation: British Investment in Overseas Mining, 1880–1913. In Capitalism in a Mature Economy: Financial Institutions, Capital Exports and British Industry, 1870–1939, ed. Jean-Jacques Van Helten and Youssef Cassis, 159–185. Aldershot: Edward Elgar.Google Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  1. 1.Department of Economy and SocietyUniversity of GothenburgGothenburgSweden

Personalised recommendations