IDEAS home Printed from https://ideas.repec.org/a/oup/revfin/v10y2006i4p587-612.html
   My bibliography  Save this article

Trading Costs in Early Securities Markets: The Case of the Berlin Stock Exchange 1880–1910

Author

Listed:
  • Thomas Gehrig
  • Caroline Fohlin

Abstract

Based on daily prices (amtliche Kurse) we estimate effective spreads of securities traded at the Berlin Stock Exchange in 1880, 1890, 1900 and 1910. Several extensions of the Roll measure are applied. We find surprisingly tight effective spreads for the historical data, comparable with similar measures of the MDAX and DAX at the end of the 20th century. Copyright Oxford University Press Science+Business Media, LLC 2006

Suggested Citation

  • Thomas Gehrig & Caroline Fohlin, 2006. "Trading Costs in Early Securities Markets: The Case of the Berlin Stock Exchange 1880–1910," Review of Finance, European Finance Association, vol. 10(4), pages 587-612, December.
    • Handle: RePEc:oup:revfin:v:10:y:2006:i:4:p:587-612
    DOI: 10.1007/s10679-006-9010-y
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10679-006-9010-y
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10679-006-9010-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    2. Huang, Roger D & Stoll, Hans R, 1994. "Market Microstructure and Stock Return Predictions," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 179-213.
    3. Levine, Ross, 2002. "Bank-Based or Market-Based Financial Systems: Which Is Better?," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 398-428, October.
    4. Krahnen, Jan P. & Schmidt, Reinhard H. (ed.), 2004. "The German Financial System," OUP Catalogue, Oxford University Press, number 9780199253166.
    5. Lesmond, David A & Ogden, Joseph P & Trzcinka, Charles A, 1999. "A New Estimate of Transaction Costs," Review of Financial Studies, Society for Financial Studies, vol. 12(5), pages 1113-1141.
    6. Randall K. Morck, 2005. "A History of Corporate Governance around the World: Family Business Groups to Professional Managers," NBER Books, National Bureau of Economic Research, Inc, number morc05-1, March.
    7. Caroline Fohlin, 1999. "The rise of interlocking directorates in imperial Germany," Economic History Review, Economic History Society, vol. 52(2), pages 307-333, May.
    8. French, Kenneth R. & Roll, Richard, 1986. "Stock return variances : The arrival of information and the reaction of traders," Journal of Financial Economics, Elsevier, vol. 17(1), pages 5-26, September.
    9. Caroline Fohlin, 2005. "The History of Corporate Ownership and Control in Germany," NBER Chapters, in: A History of Corporate Governance around the World: Family Business Groups to Professional Managers, pages 223-282, National Bureau of Economic Research, Inc.
    10. Stoll, Hans R, 1989. " Inferring the Components of the Bid-Ask Spread: Theory and Empirical Tests," Journal of Finance, American Finance Association, vol. 44(1), pages 115-134, March.
    11. George, Thomas J & Kaul, Gautam & Nimalendran, M, 1991. "Estimation of the Bid-Ask Spread and Its Components: A New Approach," Review of Financial Studies, Society for Financial Studies, vol. 4(4), pages 623-656.
    12. James Tobin, 1956. "Estimation of Relationships for Limited Dependent Variables," Cowles Foundation Discussion Papers 3R, Cowles Foundation for Research in Economics, Yale University.
    13. Harris, Lawrence, 1990. "Statistical Properties of the Roll Serial Covariance Bid/Ask Spread Estimator," Journal of Finance, American Finance Association, vol. 45(2), pages 579-590, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mattia Cattaneo & Michele Meoli, 2013. "Investor protection and IPO survival in the Italian stock market," Chapters, in: Mario Levis & Silvio Vismara (ed.), Handbook of Research on IPOs, chapter 7, pages 141-158, Edward Elgar Publishing.
    2. Foucault, Thierry & Gehrig, Thomas, 2008. "Stock price informativeness, cross-listings, and investment decisions," Journal of Financial Economics, Elsevier, vol. 88(1), pages 146-168, April.
    3. Martin T. Bohl & Alexander Pütz & Pierre L. Siklos & Christoph Sulewski, 2018. "Information Transmission under Increasing Political Tension – Evidence for the Berlin Produce Exchange 1887-1896," CQE Working Papers 7618, Center for Quantitative Economics (CQE), University of Muenster.
    4. Gelman, Sergey & Burhop, Carsten, 2008. "Taxation, regulation and the information efficiency of the Berlin stock exchange, 1892–1913," European Review of Economic History, Cambridge University Press, vol. 12(1), pages 39-66, April.
    5. Martin T. Bohl & Alexander Pütz & Pierre L. Siklos & Christoph Sulewski, 2021. "Information transmission under increasing political tensions—Evidence from the Berlin Produce Exchange 1887–1896," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(2), pages 226-244, February.
    6. Geoffrey Poitras, 2012. "From the Renaissance Exchanges to Cyberspace: A History of Stock Market Globalization," Chapters, in: Geoffrey Poitras (ed.), Handbook of Research on Stock Market Globalization, chapter 3, Edward Elgar Publishing.
    7. Gehrig, Thomas & Fohlin, Caroline & Haas, Marlene, 2015. "Rumors and Runs in Opaque Markets: Evidence from the Panic of 1907," CEPR Discussion Papers 10497, C.E.P.R. Discussion Papers.
    8. Gehrig, Thomas Paul & Fohlin, Caroline & Haas, Marlene, 2015. "Liquidty Freezes and Market Runs; Evidencefrom the Panic of 1907," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113008, Verein für Socialpolitik / German Economic Association.
    9. Jens Günther, 2017. "Capital market effects around dividend announcements: an analysis of the Berlin stock exchange in 1895," Accounting History Review, Taylor & Francis Journals, vol. 27(3), pages 249-278, September.
    10. Gram, Dennis & Karapanagiotis, Pantelis & Krzyzanowski, Jan & Liebald, Marius & Walz, Uwe, 2021. "An extensible model for historical financial data with an application to German company and stock market data," SAFE Working Paper Series 300, Leibniz Institute for Financial Research SAFE.
    11. Thorsten Lübbers, 2009. "Is Cartelisation Profitable? A Case Study of the Rhenish Westphalian Coal Syndicate, 1893-1913," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2009_09, Max Planck Institute for Research on Collective Goods.
    12. Chambers, David, 2019. "Commodity Option Pricing Efficiency before Black Scholes Merton," CEPR Discussion Papers 13975, C.E.P.R. Discussion Papers.
    13. Alexander Opitz, 2018. "“Comrades, Let's March!”.† The Revolution of 1905 and its impact on financial markets," European Review of Economic History, European Historical Economics Society, vol. 22(1), pages 28-52.
    14. Carolyn Sissoko, 2017. "The Plight of Modern Markets: How Universal Banking Undermines Capital Markets," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 46(1), pages 53-104, February.
    15. Allen, Franklin, et al., 2010. "How Important Historically Were Financial Systems for Growth in the U.K., U.S., Germany, and Japan?," Working Papers 10-27, University of Pennsylvania, Wharton School, Weiss Center.
    16. le Bris, David & Goetzmann, William N. & Pouget, Sébastien, 2019. "The present value relation over six centuries: The case of the Bazacle company," Journal of Financial Economics, Elsevier, vol. 132(1), pages 248-265.
    17. David Chambers & Rasheed Saleuddin, 2020. "Commodity option pricing efficiency before Black, Scholes, and Merton," Economic History Review, Economic History Society, vol. 73(2), pages 540-564, May.
    18. Pierre-Cyrille Hautcoeur & Amir Rezaee & Angelo Riva, 2018. "Competition among Securities Markets," Working Papers halshs-01863942, HAL.
    19. Pierre-Cyrille Hautcoeur & Amir Rezaee & Angelo Riva, 2023. "Competition between securities markets: stock exchange industry regulation in the Paris financial center at the turn of the twentieth century," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 17(2), pages 261-299, May.
    20. Acheson, Graeme G. & Coyle, Christopher & Turner, John D., 2018. "Prices and informed trading: Evidence from an early stock market," QUCEH Working Paper Series 2018-05, Queen's University Belfast, Queen's University Centre for Economic History.
    21. Lübbers, Thorsten, 2008. "Shareholder value mining: Wealth effects of takeovers in German coal mining, 1896-1913," Explorations in Economic History, Elsevier, vol. 45(4), pages 462-476, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andres, Christian & Cumming, Douglas & Karabiber, Timur & Schweizer, Denis, 2014. "Do markets anticipate capital structure decisions? — Feedback effects in equity liquidity," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 133-156.
    2. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2015. "Wave function method to forecast foreign currencies exchange rates at ultra high frequency electronic trading in foreign currencies exchange markets," MPRA Paper 67470, University Library of Munich, Germany.
    3. Moshirian, Fariborz & Qian, Xiaolin & Wee, Claudia Koon Ghee & Zhang, Bohui, 2017. "The determinants and pricing of liquidity commonality around the world," Journal of Financial Markets, Elsevier, vol. 33(C), pages 22-41.
    4. Li, Zhiyong & Lambe, Brendan & Adegbite, Emmanuel, 2018. "New bid-ask spread estimators from daily high and low prices," International Review of Financial Analysis, Elsevier, vol. 60(C), pages 69-86.
    5. Flannery, Mark J. & Kwan, Simon H. & Nimalendran, Mahendrarajah, 2013. "The 2007–2009 financial crisis and bank opaqueness," Journal of Financial Intermediation, Elsevier, vol. 22(1), pages 55-84.
    6. Sumon Kumar Bhaumik & Manisha Chakrabarty & Ali M. Kutan & Ekta Selarka, 2021. "How Effective are Stock Market Reforms in Emerging Market Economies? Evidence from a Panel VAR Model of the Indian Stock Market," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(4), pages 795-818, December.
    7. Alexandros Gabrielsen & Massimiliano Marzo & Paolo Zagaglia, 2011. "Measuring market liquidity: An introductory survey," Papers 1112.6169, arXiv.org.
    8. Araújo, Gustavo Silva & Barbedo, Claudio Henrique da S. & Vicente, José Valentim M., 2014. "The adverse selection cost component of the spread of Brazilian stocks," Emerging Markets Review, Elsevier, vol. 21(C), pages 21-41.
    9. Randall Morck & Bernard Yeung, 2017. "East Asian Financial and Economic Development," NBER Working Papers 23845, National Bureau of Economic Research, Inc.
    10. Paul Brockman & Dennis Y. Chung, 1999. "Bid-Ask Spread Components In An Order-Driven Environment," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 22(2), pages 227-246, June.
    11. Erik Theissen, 2002. "Floor versus Screen Trading: Evidence from the German Stock Market," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 158(1), pages 32-54, March.
    12. Koopman, S.J.M. & Lai, H.N., 1998. "Modelling bid-ask spreads in competitive dealership markets," Other publications TiSEM 7a193911-dbf2-4831-ac8d-9, Tilburg University, School of Economics and Management.
    13. Flannery, Mark J. & Kwan, Simon H. & Nimalendran, M., 2004. "Market evidence on the opaqueness of banking firms' assets," Journal of Financial Economics, Elsevier, vol. 71(3), pages 419-460, March.
    14. Stelios Katranidis & Theodore Panagiotidis & Costas Zontanos, 2014. "An Evaluation Of The Greek Universities’ Economics Departments," Bulletin of Economic Research, Wiley Blackwell, vol. 66(2), pages 173-182, April.
    15. Dionigi Gerace & Qigui Liu & Gary Gang Tian & Willa Zheng, 2015. "Call Auction Transparency and Market Liquidity: Evidence from China," International Review of Finance, International Review of Finance Ltd., vol. 15(2), pages 223-255, June.
    16. George, Thomas J. & Hwang, Chuan-Yang, 1998. "Endogenous market statistics and security pricing:: An empirical investigation," Journal of Financial Markets, Elsevier, vol. 1(3-4), pages 285-319, September.
    17. Thomas Johann & Erik Theissen, 2013. "Liquidity measures," Chapters, in: Adrian R. Bell & Chris Brooks & Marcel Prokopczuk (ed.), Handbook of Research Methods and Applications in Empirical Finance, chapter 10, pages 238-255, Edward Elgar Publishing.
    18. French, Joseph J. & Taborda, Rodrigo, 2018. "Disentangling the relationship between liquidity and returns in Latin America," Global Finance Journal, Elsevier, vol. 36(C), pages 23-40.
    19. Pascual, Roberto & Escribano, Álvaro & Tapia, Mikel, 2000. "Adverse selection costs, trading activity and liquidity in the NYSE: an empirical analysis in a dynamic context," UC3M Working papers. Economics 7276, Universidad Carlos III de Madrid. Departamento de Economía.
    20. Jens Günther, 2017. "Capital market effects around dividend announcements: an analysis of the Berlin stock exchange in 1895," Accounting History Review, Taylor & Francis Journals, vol. 27(3), pages 249-278, September.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:revfin:v:10:y:2006:i:4:p:587-612. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/eufaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.