AC27 / 2222, f. 47011-47012. Courtesy of the Bank of England Archive
Record of Turner’ s account in Consols in 1847, when he exchanged 10,000 par value of them for reduced annuities( RA).
charges. How much cash Turner received is impossible to determine, since we don’ t know the exact terms of the deal. But it is likely that Turner received £ 150 in cash, of which half was compensation for the difference in timing of interest payments, and half was for the mispricing. If so, the pure gain of £ 75 is comparable to between $ 7,500 and $ 75,000 today.
As with the LA for TA swap in 1829, we do not know what motivated Turner in this case. He owned somewhat over £ 25,000 par value of Consols. Why convert just 40 % of that? It could be that, just as in 1829, he was not checking market prices diligently, but occasionally took a look, and if something piqued his interest, he acted on it. But whatever his motivation, the most interesting fact is that he did, while the bulk of the British investing public did not. This allowed for the persistence of pricing anomalies.
Turner violated the stereotype of an outstanding artist devoted to his craft but ignorant of financial affairs. But he also showed that British financial markets of the early 19th century were affected by cultural norms that denigrated finance and kept pricing anomalies alive for extended periods. His adventures in finance also illuminate the uncertainties of financial innovation, with its creation of unanticipated anomalies.
Andrew Odlyzko has had a long career in research and research management at Bell Labs, AT & T Labs and the University of Minnesota, where he is professor emeritus. He has published more than 150 technical papers in a variety of fields. His current research is centered on technology bubbles and the development of financial systems.
Sources Hamilton, James. Turner: A Life. Hodder &
Stoughton. 1997.
Moyle, Franny. The Extraordinary Life and Momentous Times of J. M. W. Turner. Penguin. 2016.
Odlyzko, Andrew M.“ Financialization of the Early Victorian Economy and the London Stock Exchange.” 2016 manuscript, available at https:// ssrn. com / abstract = 2787154
Odlyzko, Andrew M.“ Economically Irrational Pricing of Nineteenth Century British Government Bonds.” Financial History Review. Vol. 23, no. 3. December 2016. Preprint available at https:// ssrn. com / abstract = 2435399
Odlyzko, Andrew M.“ Novel Market Inefficiencies from Early Victorian Times.” Financial History Review. Vol. 24, no. 2. August 2017. Preprint available at https:// www-users. cse. umn. edu /~ odlyzko / doc / mania11. pdf
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