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Lessons from financial history

When it comes to financial markets, what you think is new is not. Now an upcoming masterclass will look through financial history to show how the lessons of the past can inform our understanding of the future. Professor Russell Napier tells us more.

A man studies financial statistics

There was a time when investors believed that numbers would have most of the answers to those difficult questions on the behaviour of asset prices. That of course was in the days when Donald Trump was a reality TV star, nobody in Eastern Europe had thought of creating an ‘illiberal democracy’, a currency union could easily become a political union, and fascism and communism did not stalk the land in Europe.

Key questions

Now investors are not quite so sure that numbers alone can provide good answers to the key questions. The upcoming Practical History of Financial Markets Masterclass – the latest in a series established in 2004 - aims to restore some of our understanding of financial markets.

Scepticism that history had anything to teach a financier armed with an electronic slide rule was high. Then came the great financial crisis and history seemed to have more to offer.

Future returns

So what can a practical history of financial markets add to our understanding? The key to this masterclass is an analysis of all the longest run equity valuation data available. Analysis of that data contradicts the assertion of the efficient markets hypothesis that all available information is in the price. For the long-term investor there are measures of equity valuation that have provided good guides to the range of future returns.

Of course few professional investors get to play the game of the long-term but financial history can still help understand the forces that drive equity prices around fair value over shorter-term time horizons. In particular changing inflationary expectations have been crucial in influencing asset markets in shorter-term time horizons and inflation is hugely impacted by socio-political forces.

Fail or succeed

Today we see a political system struggling desperately to generate the inflation necessary to inflate away record high global debt to GDP ratios.  Yet history shows how, at least in short-term horizons, politicians do not always get the inflation they desire. What will be the implications for financial markets and society in general if they fail or succeed?

The masterclass will look through financial history to assess the outlook for financial markets without the humanity stripped. What you think is new is not - after all, financial market history is a history of human behaviour.

The masterclass

Date 8 – 10 June 2017
Venue University of Edinburgh Business School, 29 Buccleuch Place, Edinburgh EH8 9JS

Further information and alumni discount

There is a 20% discount for all University of Edinburgh alumni.

More information and booking details