The objective of this chapter is to use valuation techniques from ‘modern’ finance theory to analyse the large number of advance contracts for the sale of wool that were described in previous chapters. Specifically, we conduct two separate pieces of empirical analysis. We first calculate the implied interest rates for these transactions, which can then be compared with those for similar transactions documented in extant secondary sources. Second, we examine the efficiency of the wool market, which relates to how quickly relevant information is reflected in the wool market prices. To anticipate our main findings, we observe that plausible rates of interest were charged and that the wool market appears to have been efficient.

SOURCES OF DATA, CONTRACT DETAILS AND WOOL PRICING

As discussed in detail in Chapter 2, the unique data employed in this study are the details of recorded contracts between sheep farmers and, generally, foreign merchants seeking wool to export for textile manufacture. To summarise our previous discussion, information from over 200 contracts has been collected from the National Archives for the period 1200–1330, although the vast majority were enrolled between 1270 and 1310. Simple registrations of debt and more complex arrangements are found in the Memoranda Rolls of the Exchequer, longer, more detailed contracts in the Close Rolls of the Chancery, while the Plea Rolls of the Exchequer detail disputes over, and attempted resolution of, instances of default. Most contracts were written in medieval Latin, though a handful survive in medieval French.