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Share liquidity, participation, and growth of the Boston market for industrial equities, 1854-1897


  • Rousseau, Peter L.


Financial economists have long believed that the liquidity of shares affects the level of participation in equity markets and is thus central to their deepening. This study examines the growth in industrial share liquidity that occurred in Boston over the latter half of the 19th century. From primary sources hitherto unused for scholarly investigations, namely the running annual worksheets of securities price fluctuations that underlie broker Joseph Martin's volumes on the history of the Boston stock market, I construct broad-based indices of annual prices and returns for banking and industrial equities, as well as measures of real market capitalization. A series of vector autoregressive models then relate increases in liquidity, as measured by falling par values of industrial shares due to stock splits, write-downs and re-capitalizations, entries, and exits, to advances in prices and capitalizations among traded firms. The findings support the view that increases in participation were important for sustaining Boston as the nation's leading industrial market until finally overtaken by New York sometime around 1900.

Suggested Citation

  • Rousseau, Peter L., 2009. "Share liquidity, participation, and growth of the Boston market for industrial equities, 1854-1897," Explorations in Economic History, Elsevier, vol. 46(2), pages 203-219, April.
  • Handle: RePEc:eee:exehis:v:46:y:2009:i:2:p:203-219

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    References listed on IDEAS

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    2. Rousseau, Peter L. & Sylla, Richard, 2005. "Emerging financial markets and early US growth," Explorations in Economic History, Elsevier, vol. 42(1), pages 1-26, January.
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    8. Rousseau, P. L. & Wachtel, P., 2000. "Equity markets and growth: Cross-country evidence on timing and outcomes, 1980-1995," Journal of Banking & Finance, Elsevier, vol. 24(12), pages 1933-1957, December.
    9. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-144, January.
    10. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
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    Cited by:

    1. David Greasley & Les Oxley, 2010. "Cliometrics And Time Series Econometrics: Some Theory And Applications," Journal of Economic Surveys, Wiley Blackwell, vol. 24(5), pages 970-1042, December.
    2. Rousseau, Peter L., 2011. "The Market for Bank Stocks and the Rise of Deposit Banking in New York City, 1866–1897," The Journal of Economic History, Cambridge University Press, vol. 71(04), pages 976-1005, December.
    3. Rudra P. Pradhan & Mak B. Arvin & Neville R. Norman & John H. Hall, 2014. "The dynamics of banking sector and stock market maturity and the performance of Asian economies: Time series evidence," Journal of Economic and Administrative Sciences, Emerald Group Publishing, vol. 30(1), pages 16-44, May.
    4. repec:eee:quaeco:v:66:y:2017:i:c:p:136-148 is not listed on IDEAS
    5. Hilt, Eric & Valentine, Jacqueline, 2012. "Democratic Dividends: Stockholding, Wealth, and Politics in New York, 1791–1826," The Journal of Economic History, Cambridge University Press, vol. 72(02), pages 332-363, June.
    6. Pradhan, Rudra P. & Arvin, Mak B. & Hall, John H. & Bahmani, Sahar, 2014. "Causal nexus between economic growth, banking sector development, stock market development, and other macroeconomic variables: The case of ASEAN countries," Review of Financial Economics, Elsevier, vol. 23(4), pages 155-173.
    7. Annaert, Jan & Buelens, Frans & De Ceuster, Marc J.K., 2012. "New Belgian Stock Market Returns: 1832–1914," Explorations in Economic History, Elsevier, vol. 49(2), pages 189-204.


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