New Danish Stock Market Indices, 1759-2022
Dr. Bryan Taylor, Chief Economist, Global Financial Data
Denmark has one of the longest stock market histories of any country in the world. Data for Danish stocks begins in 1759 and continues until the present, providing over 250 years of stock market history. Only France, the Netherlands and the United Kingdom have longer stock market histories. Data on Danish government bonds goes back to 1787 and discount rates to 1810. Global Financial Data has organized this history to provide analysts with over 200 years of data on stocks, bonds and bills in Denmark.
Denmark in the 1600s and 1700s
Denmark, like France, the Netherlands, Scotland and England, established international trade companies, banks and insurance companies in the 1600s and 1700s. The Danish companies included Det Danske Ostindiske Kompagnie (The Dutch East India Company) in 1616, which was dissolved in 1650. Det Islandske, Faeroske og Nordlandske Kompagni (The Iceland, Faroe and Northland Company) was established in 1620 and was taken over by the state in 1662. A second East India Company (Det Ostindiske Kompagni) was established in 1670. A new West India Company (Det Vestindiske Kompagni) was established in 1671 and the Danish Africa Company (Det Danske Afrikanske Kompagni) was founded in 1654, though it was dissolved shortly thereafter. A second Africa company was founded in 1659 and dissolved in 1672. Two Greenland companies were founded in 1697, one in Copenhagen and a second in Bergen. Although there were several Danish trade companies established in the 1600s, they were generally unsuccessful. Of the companies discussed above, only the Vestindisk Kompagni lasted into the 1700s, being dissolved in 1754.
Companies established in the 1700s lasted longer. Among the companies established were three banks, the Kurantbanken (1736-1773), the Speciesbanken (1791-1813) and the Centralkassen (1829-1859); three insurance companies, the Søassurancekompagniet (1726-1927), the Københavns Mobel-Brandassurance Kompagniet (1778-1976) and the Almendelig Brandassurance Andelsaktier (1798-2020). There were also several trading companies that were established, including the Asiatisk Kompagni (1732-1844), the Almendelige Handelskompagni (General Trading Co., 1747-1774), as well as several other short-lived companies that carried out trade with Iceland, Greenland, the Faroe Islands, the West Indies, Guinea, the Levant and Morocco. Food companies included the Bryghuis (Brewing House), the St. Kongensgade sugar refinery, the Sct. Croix sugar refinery, the Norregade sugar refinery and the Kobenhavnske Pramlaug (Copenhagen Lightermen’s Guild). There were continuous attempts to create new companies in Denmark to promote both the domestic and foreign economy.
In the early 1700s, Denmark’s financial markets were not focused, so the crown established the Kurantbank in 1736 to help the economy grow. Its purpose was to provide loans to commerce and industry and to issue banknotes. The bank provided funds to rebuild Copenhagen after the 1728 fire. One company which benefitted from its loans was the Asiatisk Kompagni which often ran into cash flow problems during the 1700s. Initially, most loans were to the private sector, but after the Seven Years’ War (1756-1763), the government absorbed a large part of the bank’s loans and by 1762, the government held about three-quarters of the bank’s 10 million rix-dollars in loans. In 1773, the Kurantbank was nationalized and shareholders received 4% royal bonds at 350 rbd. In exchange for their shares.
The Seven-Years’ War with Prussia created both inflation of about 30% during the war and profit opportunities for Danish companies. Denmark remained neutral in the European wars of the 1700s and its companies benefited from the increased demand. The Asiatisk Kompagni and other companies saw a rise in stock prices, but after the Seven-Years’ War was concluded, share prices steadily declined for the next ten years. Although the Asiatic company survived, a liquidity crisis followed the conclusion of the war, and many European trading companies failed. Danish companies also benefited from the American War for Independence in 1775-1783, and the Napoleonic Wars in 1793-1798 and 1800-1804. For this reason, the late 1700s were fairly prosperous for Denmark.
Two new banks were established in the late 1700s, and excessive note issuance was used to fund government expenditures. In 1788 den Slesvig-Holstenske Speciesbank (Schleswig-Holstein Specie Bank) was established and in 1791, den Dansk-Norsk Speciesbank (Denmark-Norway Specie Bank) was established. Both banks issued banknotes. The fire of 1795 brought down the Københavns Mobel-Brandassurance Kompagniet which had to be reorganized, but led to the establishment of the Almendelig Brandassurance Andelsaktier in 1798. During the business crisis of 1797-1799 banknote issue rose dramatically. People converted the banknotes into silver, reducing the value of the banknotes.
The Bankruptcy of 1813
The Copenhagen Securities Exchange was established in 1808. In September 1807, Britain bombed Copenhagen in order to destroy the Dano-Norwegian fleet. Denmark-Norway allied with France in 1807; however, Denmark suffered defeats between 1810 and 1812. Denmark provided troops and equipment to Napoleon, but received little financial compensation in return. Denmark paid for the war by printing currency which led to a depreciation in the value of the currency and government bonds. On January 5, 1813, Denmark declared bankruptcy. The Rigsbank was established to reorganize the state’s finances and replace the Speciesbanken. Under the Treaty of Kiel in 1814, Denmark ceded Norway to Sweden and lost its claim to lands in northern Germany. In 1813 alone, consumer prices rose by 300%. Denmark suspended foreign debt and interest payments until 1819.
The Rigsbanken issued a new currency, the Rigsbankdaler to replace the old currency at a rate of six to one. The government restricted the issue of new currency so the conversion rate between silver and the paper currency could be brought back to par. On July 4, 1818, the Nationalbank was created to replace the Rigsbanken. The Nationalbank had the sole responsibility for managing the money supply. Between 1818 and 1838, the Nationalbank reduced the money supply by half and brought banknotes and silver currency back into alignment. The bank was able to reintroduce the convertibility of silver into banknotes in 1845. The Rigsbanken was owned by the state and only 4% obligations were issued in 1814, but no equity shares. The same was true of the Denmarks Nationalbank. Initially, only bonds were issued. A 6.5% mortgage bond was issued in 1818 and a 4% obligation was issued in 1824. Scrip was issued for the bank in 1822, which was exchanged for receipts in 1834 and shares in 1837. The price of Nationalbank stock rose from 38 in 1837 to 156 in 1844 as the prospect of dividends rose. In 1844, the rix-dollar became convertible and the bank began paying dividends.
Figure 1. Denmark Stock Price Index, 1759-1937
The impact of the inflation of the 1810s can be seen in Figures 1 and 2. Figure 1 shows the nominal appreciation of stock prices during the inflation, rising dramatically between 1807 and 1813. But if you look at Figure 2, which is adjusted for inflation, you can see that stock prices actually declined between 1807 and 1813 by around 90% and only recovered after the government stabilized the currency. Stock prices rose in the 1830s and 1840s, primarily as a result in the appreciation of the stock of Denmarks Nationalbank.
After the Bankruptcy
Denmark fought two wars with Germany in the mid-1800s. The first Schleswig war (1848-1852) occurred when the German population of Schleswig, Holstein and Lauenburg rebelled against the Danish government, but with the support of Britain and Russia, Denmark proved victorious. The second Schleswig war in 1864 led to a Prussian victory. Under the Peace of Prague in 1866, Denmark ceded Schleswig and Holstein to Germany. This contributed to a bear market which ended in 1877.
Figure 2. Denmark Stock Price Index Adjusted for Inflation, 1759-1937
Broader coverage of Danish stocks in the newspapers began in 1854 and stock trading rose in the mid-1860s. The market recovered after 1877 and rose steadily for the rest of the century. The market gradually declined until the start of World War I. Denmark shipping stocks enjoyed a brief bubble during World War I, but when the war ended, Danish shipping stocks declined to their pre-war level. As in the 1700s, Denmark was able to take advantage of its neutrality during World War I. After the war, there was slower growth in Denmark. Danish stocks steadily declined between 1918 and 1932 where share prices, as can be seen in Figure 2, returned to the level they had been at, after adjusting for inflation, in the 1700s.
Figure 3. Denmark Stock Return Index, 1836-2022
Figure 3 shows that Danish stocks made no progress between 1850 and 1950. It was only after World War II that the steady appreciation in Danish stocks began, though in part due to the post-World War II inflation. Since 1950, Danish stocks have risen by 3.6% per annum after inflation and by 7.56% after adjusting for dividends. Denmark stocks continue to do well in the twenty-first century, returning 7.46% without dividends and 10.19% with dividends since 2000.
Total Returns to Stocks, Bonds and Bills