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Capital Structure, Seniority, and Risk Premia: Evidence from the London Stock Exchange, 1870–1929 -- by William N. Goetzmann, K. Geert Rouwenhorst
A new academic study by Goetzmann and Rouwenhorst analyzes security-level data from the London Stock Exchange between 1870 and 1929, constructing capital-weighted return indexes using the Investors Monthly Manual. The research finds a persistent equity risk premium of 3.7% over commercial paper and 4.5% over long-term government bonds, with returns declining monotonically by claim seniority across common stocks, preferred shares, and corporate bonds. The findings show significant co-movement wit