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

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  • 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
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    References listed on IDEAS

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    1. Caroline Fohlin, 1999. "The rise of interlocking directorates in imperial Germany," Economic History Review, Economic History Society, vol. 52(2), pages 307-333, May.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. James Tobin, 1956. "Estimation of Relationships for Limited Dependent Variables," Cowles Foundation Discussion Papers 3R, Cowles Foundation for Research in Economics, Yale University.
    10. 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.
    11. 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.
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    Citations

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    Cited by:

    1. Mattia Cattaneo & Michele Meoli, 2013. "Investor protection and IPO survival in the Italian stock market," Chapters,in: 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. repec:oup:ereveh:v:22:y:2018:i:1:p:28-52. is not listed on IDEAS
    4. repec:bla:ecnote:v:46:y:2017:i:1:p:53-104 is not listed on IDEAS
    5. 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.
    6. Caroline Fohlin, 2016. "The Venture Capital Divide: Germany and the United States in the Post-War Era," Emory Economics 1607, Department of Economics, Emory University (Atlanta).
    7. Goetzmann, Will & Le Bris, David & Pouget, Sébastien, 2017. "The Present Value Relation Over Six Centuries: The Case of the Bazacle Company," TSE Working Papers 17-794, Toulouse School of Economics (TSE).
    8. 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(01), pages 39-66, April.
    9. Geoffrey Poitras, 2012. "From the Renaissance Exchanges to Cyberspace: A History of Stock Market Globalization," Chapters,in: Handbook of Research on Stock Market Globalization, chapter 3 Edward Elgar Publishing.
    10. Caroline Fohlin & Thomas Gehrig & Marlene Haas, 2015. "Rumors and Runs in Opaque Markets: Evidence from the Panic of 1907," Emory Economics 1503, Department of Economics, Emory University (Atlanta).
    11. Gehrig, Thomas Paul & Fohlin, Caroline & Haas, Marlene, 2015. "Liquidty Freezes and Market Runs; Evidencefrom the Panic of 1907," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113008, Verein für Socialpolitik / German Economic Association.
    12. 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.
    13. 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.
    14. 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.

    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

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