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How Contagious Was the Panic of 1907? New Evidence from Trust Company Stocks

Author

Listed:
  • Caroline Fohlin
  • Zhikun Lu

Abstract

Using a new dataset of all NYC trust company stocks, we study the impact of the Panic of 1907 and the ensuing cash infusion by JP Morgan and the Treasury. Using synthetic controls, we find that three "troubled" trusts performed far worse than the other trusts, whose valuations rebounded within a year. Moreover, trust companies connected to "money trust" banks maintained higher valuation than independents and rebounded much faster. The desire to prevent panic from spreading from infected trusts to financial institutions in his purview could explain Morgan's rapid intervention to stem the contagion.

Suggested Citation

  • Caroline Fohlin & Zhikun Lu, 2021. "How Contagious Was the Panic of 1907? New Evidence from Trust Company Stocks," AEA Papers and Proceedings, American Economic Association, vol. 111, pages 514-519, May.
    • Handle: RePEc:aea:apandp:v:111:y:2021:p:514-19
    DOI: 10.1257/pandp.20211097
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    Citations

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    Cited by:

    1. Lars Vilhuber, 2023. "Report of the AEA Data Editor," AEA Papers and Proceedings, American Economic Association, vol. 113, pages 850-863, May.
    2. Matthew Jaremski & David C. Wheelock, 2022. "Interbank Networks and the Interregional Transmission of Financial Crises: Evidence from the Panic of 1907," Working Papers 2022-020, Federal Reserve Bank of St. Louis, revised Sep 2023.

    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • N81 - Economic History - - Micro-Business History - - - U.S.; Canada: Pre-1913

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