EH.Net Abstracts in Economic History

                EHS Abstract Submission
                    (c) 1996 Academic Press
-----------------------------------------------------------
              Name:  Lea V. Carty
             Email:  lvc2 at columbia.edu
       Institution:  Columbia University

         Co-author:

             Title:  Regional Interest Rate Premia in the American Railroad
Bond Market from 1876 to 1890

  Internet Address
of abstracted work:

           By mail:
                     Department of Economics
                     Columbia University
                     New York, NY 10027


          Language:  English

          Abstract:
   A pattern of higher interest rates in the South and West of the
postbellum United States has been well established in the literature.
Kenneth Snowden has examined their effects on home and farm mortgages
(1987a).  Lance Davis has tracked similar patterns in bank-financed
projects (1965).  This work complements that of Snowden and Davis by
establishing that similar interest rate premia existed in the railroad bond
market -- the most institutionally mature capital market of the era.  Hence
a broad range of investment opportunities of the era were subject to
capital market imperfections.  In this paper I examine the offering yields
of long-term, railroad bond yields issued from 1876 to 1890.  I use a
risk-neutral model of a bond US value that incorporates both the likelihood
and severity of default to solve for the interest rate premia paid by the
South and West -- 0.97% and 1.02% respectively.


Bibliography:  Carty, Lea V. "Regional Interest Rate Premia in the
American Railroad Bond Market From 1876 to 1890." Explorations in Economic
History, 
October 1996.

           Subject:  W
 Geographical Area:  7
    Country/Region: U.S.A.
       Time Period:  7