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
Figure 4. Denmark Total Return to Stocks, Bonds and Bills, 1837-2022
The return to Danish stocks, bonds and bills since 1837 is illustrated in Figure 4. Until the 1970s, there was little difference in the return to government bonds and cash/bills. The reason for this can be seen in Figure 5 which compares the yield on Danish government bonds back to 1787 with the Denmark National Bank’s discount rate from 1810 until the present. During the inflation of the 1810s, the discount rate hit 15%, though the payment of interest on government bonds was suspended for six years. The discount rate and yield on bonds largely tracked each other until the 1960s when bond yields skyrocketed, hitting 20% in 1980. Yields continually declined for the next 40 years, but have recently risen as the National Bank has tried to control inflation. As in all countries, stocks clearly outperformed both bonds and bills.
Figure 5. Denmark Government Bond Yield and Central Bank Discount Rate, 1787-2022
The exchange rate between the US Dollar and the Danish currency is illustrated in Figure 6. The only anomaly is the severe rise in the exchange rate between 1807 and 1813 when the inflation and resulting depreciation of the currency occurred. A new currency was introduced as a result of the bankruptcy of 1813. Since 1850, there has been a gradual depreciation in the Danish currency relative to the US Dollar, but only by 50% over the past 170 years (adjustments were made for the two currency conversions of 1813 and 1873).
Figure 6. US Dollar - Denmark Riksdaler/Krone Exchange Rate, 1792 to 2022
Financial Market Performance in Denmark
Annual returns to stocks, bonds and bills in Denmark, as well as a calculation of the Equity Risk Premium (ERP) are provided in Table 1. During most of Denmark’s history, returns have been inferior to the rest of the world. Returns were particularly low between 1914 and 1981 for all investment classes. However, returns have been very high since 1981 when bond yields began to decline in Denmark and other countries. Annualized real stock returns rose from 3.09% between 1914 and 1981 to 10.63% between 1981 and 2021 while bond returns rose from 1.28% to 6.75%. During the twenty-first century, stocks have returned 10.19% and bonds 3.08% leading to the highest Equity Risk Premium in Denmark’s history at 6.90%. However, the return to cash has been its lowest in history, at 0.11%. Returns were also high between 1815 and 1848 as Denmark recovered from bankruptcy in 1813 and stabilized the economy, and during the period before World War I when Denmark benefited from greater international trade.
|
Years |
Stock Price |
Stock Return |
Bond Return |
Bill Return |
ERP |
|
1815-1848 |
9.57 |
10.55 |
9.54 |
||
|
1848-1873 |
-1.23 |
3.16 |
4.62 |
3.55 |
-1.39 |
|
1873-1914 |
0.98 |
6.6 |
3.66 |
4.41 |
2.84 |
|
1914-1945 |
-3.52 |
2.49 |
1.49 |
0.81 |
0.99 |
|
1945-1981 |
-1.9 |
3.62 |
1.09 |
1.63 |
2.5 |
|
1914-1981 |
-2.65 |
3.09 |
1.28 |
1.25 |
1.79 |
|
1981-2021 |
8.23 |
10.63 |
6.75 |
3.44 |
3.64 |
|
1789-2021 |
0.95 |
2.68 |
|||
|
1848-2021 |
0.85 |
5.7 |
3.61 |
2.86 |
2.01 |
|
1899-1999 |
-0.5 |
4.62 |
2.98 |
2.7 |
1.59 |
|
1919-2021 |
1.85 |
6.26 |
4.11 |
2.62 |
2.06 |
|
1999-2021 |
7.46 |
10.19 |
3.08 |
0.11 |
6.9 |
Table 1. Denmark Annual Returns to Stocks, Bonds and Bills, 1789 to 2021
Table 2 documents the bull and bear markets that Denmark has gone through over the past 260 years. Although the greatest bull market occurred between 1790 and 1846, this was primarily because of the inflation that occurred during the Napoleonic Wars. After adjusting for inflation, the Danish stock market actually lost 94% of its value between 1790 and 1813, and between 1790 and 1846, the stock market tripled in price, This was still a significant gain, but nothing close to the 22-fold increase in nominal terms. Since 1850, there have been five bull markets in which stocks more than tripled in price. The inflation in World War I reduced the size of the bull market between 1877 and 1918. After inflation, the market only rose by about 50%, not 240%.
Ignoring the impact of the inflation in the 1810s, the two worst nominal declines were between 1918 and 1932 and between 2007 and 2009 when the market declined ober 60%. All other bear markets registered declines of less than 50%.
|
Bottom |
Change |
Top |
Change |
|
12/31/1782 |
167.29 |
||
|
08/31/1790 |
-45.11 |
07/31/1846 |
2310.48 |
|
12/31/1877 |
-49.13 |
9/30/1918 |
241.16 |
|
4/30/1932 |
-63.84 |
5/31/1944 |
123.24 |
|
6/30/1949 |
-28.08 |
7/31/1966 |
179.73 |
|
11/30/1971 |
-25.90 |
8/31/1973 |
115.25 |
|
11/30/1974 |
-38.22 |
7/31/1976 |
60.43 |
|
3/5/1980 |
-30.64 |
1/20/1984 |
294.22 |
|
1/8/1985 |
-29.65 |
4/18/1986 |
58.23 |
|
11/20/1987 |
-28.37 |
8/2/1990 |
114.35 |
|
10/28/1992 |
-34.94 |
4/6/1998 |
211.18 |
|
3/15/1999 |
-26.32 |
10/6/2000 |
80.32 |
|
3/12/2003 |
-48.46 |
10/11/2007 |
246.57 |
|
3/9/2009 |
-62.06 |
1/18/2011 |
113.3 |
|
9/23/2011 |
-31.07 |
2/19/2020 |
267.6 |
|
3/18/2020 |
-26.05 |
12/30/2021 |
93.44 |
|
9/29/2022 |
-20.91 |
Table 2. Bull and Bear Markets in Denmark, 1759 to 2022
Conclusion
Denmark provides one of the longest financial histories of any country in the world. Data on the stock market begins in 1759, on bonds in 1788, on the discount rate in 1810 and total returns on stocks begins in 1837. Denmark was largely neutral in the wars of the 1700s and World War I from which Danish companies benefitted. However, Denmark’s participation in the Napoleonic wars in the 1810s led to the highest inflation in its history, the only default on interest payments and the largest inflation-adjusted decline in stocks and bonds in the country’s history. Denmark’s stock market has outperformed other European markets since World War II ended and has continued to do well in the twenty-first century. Denmark and Switzerland both show the benefits of neutrality when war surrounds them and taking advantage of international trade. Both countries are small and dependent on trade with other countries, and these facts are reflected in their stock market histories.
Sources
The first publication of Danish share prices occurred in 1759. Share prices were occasionally published along with commodity prices. In 1806, the newspapers began publishing bond prices as well, but up until 1813, the prices of stocks were more common than those of bonds. In the 1830s official price lists of stocks were published and in the 1850s, a broader range of stocks was published.
We have used a number of resources in order to put together a history of Danish stocks. Bent Stancke provided data on Copenhagen stocks from 1759 to 1830 in The Danish Stock Market 1750-1840, published in Copenhagen in 1971. We consulted several newspapers including Dagen (1835-1843), Faedrelandet (1840-1852) and Dagbladed of Copenhagen (1851-1872) to cover the period from 1836 to 1872. Data for individual companies from 1873 to 1912 was taken from various issues of Medarbejdere H. Green, Fonds og Aktier, Copenhagen: L. Jorgensen, 1883-1912. Data on individual companies was also obtained from Danske Statistiske Department, Statistisk Arbog, Copenhagen: Statistiske Dept. from 1893 to 1937. By combining these sources together, we were able to put together data on Copenhagen stocks from 1759 to 1937. Danish bond prices were available from Amsterdam between 1788 and 1830.
Stancke provided information on several banks including the Kurantbanken (1736-1773), Speciesbanken (1791-1813) and Centralkassen (1829-1839), on several insurance companies, including the Søassurancekompagnie (1726-1927), Almindelig Brandassurance (1798-1891) and Københavns Mobel-Brandassurance (1778-1891) and several trading companies including the Det Kongelige Octroyerede Danske Asiatiske Kompagni (1732-1844), Det Almindelige Handelskompagnie (1747-1774) (The General Trading Co.), Det Ostersoisk-guineiske Kompagni (1781-1786) and Det vestindiske Handelskompagni (1778-1786). Periodic price data as well as shares outstanding data were provided, but limited information on dividends.
The newspapers provided periodic data on companies listed in Copenhagen, and data were collected each month on the last available date for that month. Data for the Danmarks Nationalbank was collected beginning in June 1837. Data for the København-Roskilde Jernbane (Railroad) began in June 1845, but data for other companies didn’t begin until September 1854 when prices for the three insurance companies mentioned above as well as the Københavns Tivoli and Københavns Kasino began. By 1871, data on 15 different companies was available. Green’s Fonds og Aktier and the Statistisk Arbog books provided comprehensive coverage of the Copenhagen stock exchange from 1873 to 1937 covering over 100 companies. The Fonds og Aktier book provided price data, dividends and shares outstanding while the Statistisk Arbog only provided price data and dividends.
Data before 1835 is periodic with the availability of data depending upon the year. There are multiple years when no data were available, such as 1776-1780 and 1791-1802 although no data were available after 1830. Monthly data are available from June 1836 to 1925 and bi-monthly to 1937. Monthly indices for the Copenhagen Stock Exchange were calculated beginning in 1921 and we were able to link up the indices GFD calculated based upon individual stocks to the real-time indices calculated in Copenhagen to provide a continuous series for stocks.
Newspapers: Dagen (1835-1843), Faedrelandet (1840-1852) and Dagbladed of Copenhagen (1851-1872)
Danmarks Nationalbank, Danmarks Nationalbank, 1818-2018, Copenhagen
Danske Statistiske Department, Statistisk Arbog, Copenhagen: Statistiske Dept.
Green, Medarbejdere H. Fonds og Aktier, Copenhagen: L. Jorgensen
League of Nations, Monthly Bulletin of Statistics, Geneva: League of Nations, 1922-1946
Maercher, Michael, Danish Banking Before and After the Napoleonic Wars: A Survey of Danish Banking, 1736-1857, memo
Stancke, Bent The Danish Stock Market 1750-, Copenhagen: University of Copenhagen Institute of Economic History, 1971
United Nations, Monthly Bulletin of Statistics, New York: UN, 1947-1975
