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The boats that did not sail: Asset Price Volatility and Market Efficiency in a Natural Experiment

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  • Peter Koudijs

Abstract

What explains short-term fluctuations of stock prices? This paper exploits a natural experiment from the 18th century in which information flows were regularly interrupted for exogenous reasons. English shares were traded on the Amsterdam exchange and news came in on sailboats that were often delayed because of adverse weather conditions. The paper documents that prices responded strongly to boat arrivals, but there was considerable volatility in the absence of news. The evidence suggests that this was largely the result of the revelation of (long-lived) private information and the (transitory) impact of uninformed liquidity trades on intermediaries' risk premia.

Suggested Citation

  • Peter Koudijs, 2013. "The boats that did not sail: Asset Price Volatility and Market Efficiency in a Natural Experiment," NBER Working Papers 18831, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:18831
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    References listed on IDEAS

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    2. David Yermack, 2012. "Tailspotting: Identifying and profiting from CEO vacation trips," NBER Working Papers 17940, National Bureau of Economic Research, Inc.
    3. Ann M. Carlos & Erin Fletcher & Larry Neal, 2015. "Share portfolios in the early years of financial capitalism: London, 1690–1730," Economic History Review, Economic History Society, vol. 68(2), pages 574-599, May.

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    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • N2 - Economic History - - Financial Markets and Institutions

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