The Russian Stock Market Before the Revolution

Global Financial Data has put together indices of the St. Petersburg Stock Exchange before World War I and the collapse of Russia into Communism. The data was made available to us from Yale’s International Center for Finance. The files were marked in transliterated Cyrillic, so we converted the names back into Cyrillic and then translated the names of the companies into English. We then classified the stocks according to their sector so we could see how one sector did relative to the others. Although the data from Yale was rich in price data, it was lacking in shares outstanding and dividends. The source material that Yale collected only had information on capitalization in the first issue. None of the other issues provided any information on either capitalization or shares outstanding. Except for a few issues around 1900, no data on dividends was available either, and having dividend data for four or five years was hardly sufficient to create a useful total return series.  

Common Stock and Scrip

Every stock market has its own peculiarities and one of the interesting facts about the St. Petersburg Stock Exchange is that over time, banks, railroads and other firms raised more capital by issuing new shares as in any other country; however, the newly issued shares traded alongside the original shares. All of the issues would trade simultaneously on the St. Petersburg Stock Exchange, even though the price of each was virtually the same. The St. Petersburg-Tula Land Bank had 15 issues trading simultaneously, the Don Land Bank 14 and the Bessarabsko-Tavrichesky Land bank 19. In all, there were over 150 issues of scrip that traded alongside the mother shares for each company. Once these issues were designated as scrip, rather than common shares, this left about 425 different companies that traded on the St. Petersburg Stock Exchange between 1865 and 1917, some for a few months, some for the entire 52 years. The St. Petersburg Stock Exchange shut down in August 1914 when World War I began, briefly reopened in 1917, then shut down for the next 75 years when the Russian Revolution began. The goal of organizing this data was to produce indices which could be used to analyze the Russian stock market. The source material from Yale principally relied upon St. Petersburg, but quotes from the Moscow, Kiev and Warsaw exchanges were provided as well. Of course, before World War I, the Russian Empire included not only Russia, but the Baltic states, Poland, and Ukraine. The principal industries were banks and railroads with oil companies, utilities, mining, insurance and iron and steel companies providing most of the capitalization. Russia tried to follow Germany’s lead by infusing capital into the banks and railroads to enable the country to industrialize. The railroads relied heavily on bonds as well as common stocks to raise capital for a network of railroads to crisscross the empire. Russia also relied extensively on infusions of capital from Germany, France and Britain to fund the country’s transformation. Of course, when the Communists took power, all the shares became worthless, though foreign-listed companies continued to trade in Paris and Berlin until the 1920s.  

Creating Indices

Our first step was to create a Russian index that included all the companies that traded in St. Petersburg, an All-Share index, but we also wanted to create an index of Russian “blue chip” stocks. We did this by finding the 50 stocks with the largest number of months traded and created an index of the 50 top companies. Because we had no data on shares outstanding, the index had to be equal-weighted meaning that a small cotton factory had the same weight as the largest railroad or bank in the country. To try and address this issue, we collected capitalization data from two stock exchanges where Russian shares also traded, in Paris and in Berlin. We were able to collect data on 68 companies that listed in St. Petersburg and abroad. Of course, the primary companies that listed abroad were the larger blue-chip companies. When we summed up the capitalization of these companies in 1913, it came to $982 million (1910 million Rubles). Our 1900 figure of $486 million is about one-third of the estimate made by Leslie Hannah. The three main sectors in 1913 were railroads (40%), finance (38%) and energy (14%).



Figure 1. Market Cap of Russian Industries in 1913 in US Dollars

               The final question that remained was what the total return was to investors, including dividends that were paid out.  We were able to obtain dividend data for most of the companies back to 1885.  Before 1885, we turned to the Berlin Stock Exchange yearbook which had data on Russian companies that listed in Berlin.  Since dividend data was only available on a limited number of companies before 1885, the total return indices before 1885 are not reliable.  After 1885, sufficient data is available. The dividend yield for the Russian market is between 4% and 5% which is comparable to the yield in other countries. Some of the railroads paid no dividend so this helped to pull down the average dividend yield.

Russian Stock Price Indices

               Below is a graph that compares the two indices that we calculated for Russia between 1865 and 1914. We calculated indices for both the 68 stocks for whom we were able to find share outstanding data (GFRUSMPM) and the equal-weighted 50 Blue Chip stock index (GFRUS50EPM). Although the actual returns vary over time, the two indices follow the same behavior and provide very similar returns.