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Title
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Go active or stay passive : investment trust, financial innovation and diversification in Belgium's early days
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Author
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Abstract
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| In 1836, Société Générale created the world's first closed-end equity fund, Mutualité Industrielle. It promised to be a diversification tool targeted towards less-wealthy investors. We confirm that the trust's returns were indeed better than returns on synthetic portfolios such investors had access to. However, it never became a commercial success. This paper presents a possible rational explanation why this innovation was liquidated in 1873. First, we show that the trust offered a performance similar to randomly-selected portfolios. Second, portfolio strategies to which mostly wealthy and sophisticated investors had access were able to outperform the trust. Mutualité Industrielle's failure to offer a sufficiently attractive alternative to investors is consistent with its difficulty to attract sufficient funds to keep the trust in business. |
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Language
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English
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Source (journal)
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Explorations in economic history. - Kent, Ohio, 1969, currens
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Publication
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Kent, Ohio
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2021
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ISSN
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0014-4983
1090-2457
[online]
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DOI
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10.1016/J.EEH.2020.101378
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Volume/pages
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79
(2021)
, p. 1-17
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Article Reference
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101378
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ISI
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000604576400005
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Medium
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E-only publicatie
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Full text (Publisher's DOI)
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Full text (open access)
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Full text (publisher's version - intranet only)
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