Geographic Regions in the GFD Indices, Part 2
Bryan Taylor, Chief Economist, Global Financial Data
Southern European countries border the Mediterranean and include France, Spain, Portugal and Italy. The Paris Bourse was founded in 1724 and has been the largest exchange on continental Europe since the 1700s. It reorganized as Euronext Paris in 2000 along with the Brussels and Amsterdam exchanges. Regional exchanges existed in Lyon, Bordeaux, Marseille, Nantes, Toulouse, Lille and Nice. The primary exchange was the parquet in each city and secondary trading occurred on the coulisse.
Spain has four primary stock exchanges in Madrid (1831), Barcelona (1915), Bilbao (1905) and Valencia (1980). The Milan Stock Exchange was founded in 1808. Regional exchanges existed in Naples, Turin, Trieste, Venice, Genoa, Florence, Rome (1802), Bologna and Palermo. In 1997 all of the exchanges were merged into the Borsa Italiana. Portugal had two primary exchanges in Lisbon (1769) and in Porto (1891) which now form Euronext Portugal.
Figure 9 compares the performance of the French, Spanish and Italian stock markets since 1890. The indices are provided in US Dollars since all three countries have suffered from inflation during the past 100 years. This enables us to provide a direct comparison of the three countries. As can be seen, there was almost no progress between 1890 and 1980, rising prices occurred between 1981 and 2008 and stagnation since then. Of the three, France has had the best performance and Italy the worst. The timing of bull and bear markets has been similar between the three.
Figure 9. France, Spain and Italy Stock Price Indices, 1890 to 2022
Eastern European countries suffered from disruption during the twentieth century because Communist countries closed their exchanges. Russia, the Czech Republic, Hungary and Poland all saw their exchanges shut down under Communism as did Bulgaria and Romania. Although Greece was never a Communist country, its geographic location makes it part of eastern Europe. Even though Greece didn’t suffer from Communism after World War I, it did suffer from high inflation. The Bratislava stock exchange (1993) in Slovakia is too small to include in the Eastern European index as are the stock markets in Talinn in Estonia, (1995), Riga in Latvia (1993) and Vilnius in Lithuania (1993).
The St. Petersburg Stock Exchange opened in 1865, was closed under the Communists in 1917 and reopened in 1991. The Warsaw Stock Exchange originally opened in 1817 when it was part of Russia. The Warsaw exchange closed in 1939 when Poland was occupied by the Soviets and Germans and reopened in 1991. The Czech Republic and Hungary were originally part of Austria-Hungary and shares from each country traded in Vienna. The Prague Stock Exchange opened in 1871, closed in 1948 and reopened in 1993. The Budapest Stock Exchange originally opened in 1864, closed in 1948 and reopened in 1990. The Bucharest Stock Exchange originally opened in 1882, was closed in 1945 and reopened in 1995.
The performance of the four primary Eastern European markets since 1994 is compared in Figure 10. Prices are converted into US Dollars to avoid the impact of inflation. Of the four, Russia has provided the best returns, though it remains below its 2008 peak. The same is true of Budapest. None of the four markets has provided superior returns over the past 30 years.