Yale Bulletin and Calendar

March 16, 2001

Volume 29, Number 22

Yale SOM to establish database for
study of world's financial history

The Yale School of Management (Yale SOM) received two gifts totaling $1.2 million dollars for its International Center for Finance (ICF) to help fund collecting research and publication in financial market history.

The grants come from an anonymous donation which will underwrite the development of a historical database of U.S. and global stock market prices, the publication of a volume on financial innovation and the launching of a research collection of historical financial securities. The database and collection will be used by economists, historians and financial scholars studying the development of the international capital markets.

According to K. Geert Rouwenhorst, deputy director of ICF, the gift combines an outright grant of $950,000 plus a $250,000 "challenge grant," which would match the dollar amounts of other subsequent donors who are interested in the history of financial instruments and in supporting the center's work.

The University created the ICF at Yale SOM as an interdisciplinary home for active research in financial economics. Its doors were opened in the fall of 1999 by Lawrence H. Summers, then U.S. secretary of the treasury. The center's fellows include leading scholars in and outside of Yale SOM who work on key empirical and theoretical problems in financial economics. Two major components of the ICF's agenda are the long-term study of global financial market development and the evolution of financial instruments and contracts.

"We are sincerely grateful for the generosity of the donor," said William N. Goetzmann, director of ICF and professor of finance at Yale SOM. "This kind gift will allow the center to create key resources for research into the development and functioning of the world capital markets."

The center, which is home to some of the world's leading scholars in financial economics, includes a collection of historical data research on the New York and London stock exchanges and essays on financial innovation aimed at creating a repository for historical data from the United States and international capital markets, and making these databases electronically available for research by financial scholars.

"We are tying historical research to the new technology for data distribution -- something like the Human Genome Project -- only for financial data," explained Goetz-mann. "Our plan is to allow researchers from all over the world to download detailed stock market prices and records from the ICF website, and to augment it with their own collection.

"Without the help of our donor, and others who may be motivated to contribute as a result, no single research center would have the individual resources to accomplish this," he added.

The entire record of the London Exchange, the leading global financial market, exists in hard copy for the period from 1871 to 1930, the peak of the colonial era. To support sophisticated research, these data must be transformed into an electronic database that can be manipulated and analyzed. The database will provide critical insight on market movement over the long-term and on how political events affect the global bond markets, said Goetzmann.

The center will work on creating electronic (pdf) files of the entire London securities markets over this period. The ICF directors believe the project has the potential to become the definitive empirical database used by financial scholars studying international markets -- that it is a rare "hold-out sample" to test a rich array of propositions about global market crisis, innovations, exchange effects, wars and other markets. These data, they note, will make it possible to chart the performance of selected securities through time and evaluate the effects of various innovations.

Once completed, the database would be open to worldwide scholars and the public for research purposes.

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Campus Notes