That’s Where The Money Was: Foreign Bias and English Investment Abroad, 1866–1907


  • Thanks to James Levinsohn, Linda Tesar, Warren Whatley and to our anonymous referee and the editor for very helpful comments and corrections. Also, special thanks are extended to Joshua S Louria, and Deepti Iyer for their invaluable research assistance, and to seminar participants at the Cliometrics Society annual meetings and at the NBER summer institute. The views expressed in this article are those of the authors and should not be attributed to the Board of Governors of the Federal Reserve System or other members of its staff.


Why did Victorian Britain send so much capital abroad? We collect over 500,000 monthly British and foreign security returns between 1866 and 1907 and investigate the effect of international diversification on Victorian investors’ portfolios. This is the first study to use nineteenth-century data that is both broad enough and sampled at a high enough frequency to examine if foreign assets expanded the mean-variance efficient frontier of British investors and how valuable this expansion was in terms of utility. We find that foreign assets significantly expanded the mean-variance frontier and resulted in utility gains equivalent to large increases in wealth.