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The London Stock Exchange and the British shadow banking system

Author

Listed:
  • Andrew Odlyzko

    (University of Minnesota)

Abstract

"Previously unknown basic statistics are obtained about the opera- tions of the London Stock Exchange (LSE) in early Victorian times. Integration of data from the Bank of England Archive with price reports, press coverage, and other sources produces estimates for volume of transactions, distribution of earnings among dealers, efficiency of the market, and the coverage of avail- able price lists. For example, it is found that for some securities, prices were reported for under 20% of transactions. The LSE was surprisingly small and by some measures also surprisingly efficient. Much of its efficiency appears to have come from its deep involvement in the “shadow banking system” of that era, a connection that appears to have been misunderstood and almost com- pletely neglected in the past. The low levels of activity, the dominance of small investors, and low cost of the system show the very early stages of the “fi- nancialization” of the modern economy and provide interesting perspectives on modern developments."

Suggested Citation

  • Andrew Odlyzko, 2017. "The London Stock Exchange and the British shadow banking system," Working Papers 17002, Economic History Society.
    • Handle: RePEc:ehs:wpaper:17002
    as

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    File URL: http://www.dtc.umn.edu/~odlyzko/doc/mania12.pdf
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    References listed on IDEAS

    as
    1. Temin, Peter & Voth, Hans-Joachim, 2013. "Prometheus Shackled: Goldsmith Banks and England's Financial Revolution after 1700," OUP Catalogue, Oxford University Press, number 9780199944279, Decembrie.
    2. repec:ucp:bkecon:9780226301532 is not listed on IDEAS
    3. Davis, Lance & Neal, Larry, 1998. "Micro Rules and Macro Outcomes: The Impact of Micro Structure on the Efficiency of Security Exchanges, London, New York, and Paris, 1800-1914," American Economic Review, American Economic Association, vol. 88(2), pages 40-45, May.
    4. Neal, Larry & Davis, Lance, 2006. "The evolution of the structure and performance of the London Stock Exchange in the first global financial market, 1812–1914," European Review of Economic History, Cambridge University Press, vol. 10(3), pages 279-300, December.
    5. Ann M. Carlos & Larry Neal, 2006. "The micro‐foundations of the early London capital market: Bank of England shareholders during and after the South Sea Bubble, 1720–251," Economic History Review, Economic History Society, vol. 59(3), pages 498-538, August.
    Full references (including those not matched with items on IDEAS)

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    • N00 - Economic History - - General - - - General

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