IDEAS home Printed from https://ideas.repec.org/p/irn/wpaper/21-01.html
   My bibliography  Save this paper

Measuring stock market integration during the Gold Standard

Author

Listed:
  • Rebecca Stuart

Abstract

This paper uses a broad geographical sample of economies to study stock market integration during the classical Gold Standard. It is novel in estimating a common or “global†component of stock market returns across all countries in the sample and studying how individual markets co-move with this. Variations in the integration of individual exchanges often appears related to large domestic financial and political crises as idiosyncratic shocks were more common than they are today. The results suggest that although overall integration rose during this period, it was low compared to more recent data. The results are robust to alternative formulations of the global component and alternative measures of returns.

Suggested Citation

  • Rebecca Stuart, 2021. "Measuring stock market integration during the Gold Standard," IRENE Working Papers 21-01, IRENE Institute of Economic Research.
    • Handle: RePEc:irn:wpaper:21-01
    as

    Download full text from publisher

    File URL: https://www5.unine.ch/RePEc/ftp/irn/pdfs/WP21-01.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Grossman, Richard & Campbell, Gareth & Turner, John, 2019. "Before the Cult of Equity: New Monthly Indices of the British Share Market, 1829-1929," CEPR Discussion Papers 13717, C.E.P.R. Discussion Papers.
    2. Pukthuanthong, Kuntara & Roll, Richard, 2009. "Global market integration: An alternative measure and its application," Journal of Financial Economics, Elsevier, vol. 94(2), pages 214-232, November.
    3. David Le Bris & Pierre-Cyrille Hautcoeur, 2010. "A challenge to triumphant optimists? A new blue chips Index for the Paris stock-exchange (1854-2007)," Post-Print halshs-00754455, HAL.
    4. Larry Neal & Marc Weidenmier, 2002. "Crises in the Global Economy from Tulips to Today: Contagion and Consequences," NBER Working Papers 9147, National Bureau of Economic Research, Inc.
    5. Antoine Parent & Cécile Bastidon & Michael Bordo & Marc Weidenmier, 2019. "Towards an unstable hook : the evolution of stock market integration since 1913," SciencePo Working papers Main hal-03403180, HAL.
    6. Hoag, Christopher, 2006. "The Atlantic Telegraph Cable and Capital Market Information Flows," The Journal of Economic History, Cambridge University Press, vol. 66(2), pages 342-353, June.
    7. Pierre-Cyrille Hautcoeur & Angelo Riva, 2012. "The Paris financial market in the nineteenth century: complementarities and competition in microstructures," Economic History Review, Economic History Society, vol. 65(4), pages 1326-1353, November.
    8. repec:hal:pseose:halshs-00754572 is not listed on IDEAS
    9. repec:cup:jdemec:v:79:y:2013:i:03:p:71-89_00 is not listed on IDEAS
    10. Paolo Mauro & Nathan Sussman & Yishay Yafeh, 2002. "Emerging Market Spreads: Then versus Now," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 695-733.
    11. Le Bris, David & Hautcœur, Pierre-Cyrille, 2010. "A challenge to triumphant optimists? A blue chips index for the Paris stock exchange, 1854–2007," Financial History Review, Cambridge University Press, vol. 17(2), pages 141-183, October.
    12. Bekaert, Geert & Mehl, Arnaud, 2019. "On the global financial market integration “swoosh” and the trilemma," Journal of International Money and Finance, Elsevier, vol. 94(C), pages 227-245.
    13. Bordo, Michael D. & Murshid, Antu Panini, 2006. "Globalization and changing patterns in the international transmission of shocks in financial markets," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 655-674, June.
    14. Eugene Canjels & Gauri Prakash-Canjels & Alan M. Taylor, 2004. "Measuring Market Integration: Foreign Exchange Arbitrage and the Gold Standard, 1879-1913," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 868-882, November.
    15. Robert-Paul Berben & W. Jos Jansen, 2009. "Bond market and stock market integration in Europe: a smooth transition approach," Applied Economics, Taylor & Francis Journals, vol. 41(24), pages 3067-3080.
    16. Michie, Ranald, 2001. "The London Stock Exchange: A History," OUP Catalogue, Oxford University Press, number 9780199242559, Decembrie.
    17. 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.
    18. Obstfeld,Maurice & Taylor,Alan M., 2005. "Global Capital Markets," Cambridge Books, Cambridge University Press, number 9780521671798, Enero.
    19. Philippe Jorion & William N. Goetzmann, 1999. "Global Stock Markets in the Twentieth Century," Journal of Finance, American Finance Association, vol. 54(3), pages 953-980, June.
    20. Pierre-Cyrille Hautcoeur & Angelo Riva, 2012. "The Paris financial market in the XIXth century: Complementarities and competition in microstructures," Post-Print halshs-00754572, HAL.
    21. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 16(32), pages 52-82.
    22. Chambet, Anthony & Gibson, Rajna, 2008. "Financial integration, economic instability and trade structure in emerging markets," Journal of International Money and Finance, Elsevier, vol. 27(4), pages 654-675, June.
    23. Eugene N. White, 2007. "The Crash of 1882, Counterparty Risk, and the Bailout of the Paris Bourse," NBER Working Papers 12933, National Bureau of Economic Research, Inc.
    24. Volosovych, Vadym, 2011. "Measuring financial market integration over the long run: Is there a U-shape?," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1535-1561.
    25. Stuart, Rebecca, 2017. "Co-movements in stock market returns, Ireland and London 1869–1929," Financial History Review, Cambridge University Press, vol. 24(2), pages 167-184, August.
    26. repec:spo:wpmain:info:hdl:2441/1g62nsnv8d9lcrkbi2s8iikjat is not listed on IDEAS
    27. repec:hal:spmain:info:hdl:2441/1g62nsnv8d9lcrkbi2s8iikjat is not listed on IDEAS
    28. Richard S.Grossman, 2014. "Bloody Foreigners! Overseas Equity on the London Stock Exchange, 1869-1928," Wesleyan Economics Working Papers 2014-001, Wesleyan University, Department of Economics.
    29. Gareth Campbell & Meeghan Rogers, 2017. "Integration between the London and New York Stock Exchanges, 1825–1925," Economic History Review, Economic History Society, vol. 70(4), pages 1185-1218, November.
    30. repec:bla:ecpoli:v:16:y:2001:i:32:p:51-82 is not listed on IDEAS
    31. Goetzmann, William N. & Ibbotson, Roger G. & Peng, Liang, 2001. "A new historical database for the NYSE 1815 to 1925: Performance and predictability," Journal of Financial Markets, Elsevier, vol. 4(1), pages 1-32, January.
    32. David Le Bris, 2013. "Why did French Savers buy Foreign Assets before 1914? A Decomposition of the Benefits from Diversification," Recherches économiques de Louvain, De Boeck Université, vol. 79(3), pages 71-89.
    33. Bekaert, Geert & Harvey, Campbell R, 1995. "Time-Varying World Market Integration," Journal of Finance, American Finance Association, vol. 50(2), pages 403-444, June.
    34. Richard Baldwin & Philippe Martin, 1999. "Two Waves of Globalisation: Superficial Similarities, Fundamental Differences," Post-Print hal-03417560, HAL.
    35. William N. Goetzmann & Lingfeng Li & K. Geert Rouwenhorst, 2005. "Long-Term Global Market Correlations," The Journal of Business, University of Chicago Press, vol. 78(1), pages 1-38, January.
    36. Rui Esteves, 2011. "The Belle Epoque of International Finance. French Capital Exports, 1880-1914," Economics Series Working Papers 534, University of Oxford, Department of Economics.
    37. Taylor, Alan M. & Canjels, Eugene & Prakash-Canjels, Gauri, 2004. "Measuring Market Integration: Foreign Exchange Arbitrage and the Gold Standard 1874-1913," CEPR Discussion Papers 4492, C.E.P.R. Discussion Papers.
    38. Hickson, Charles R. & Turner, John D., 2002. "Free banking gone awry: the Australian banking crisis of 1893," Financial History Review, Cambridge University Press, vol. 9(02), pages 147-167, October.
    39. William Goetzmann & Roger Ibbotson & Liang Peng, 2000. "A New Historical Database For The NYSE 1815 To 1925: Performance And Predictability," Yale School of Management Working Papers ysm5, Yale School of Management, revised 01 Mar 2001.
    40. Eugene N. White, 2007. "The Crash of 1882 and the Bailout of the Paris Bourse," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 1(2), pages 115-144, July.
    41. repec:oup:ecpoli:v:16:y:2001:i:32:p:51-82 is not listed on IDEAS
    42. Neal, Larry, 1987. "The Integration and Efficiency of the London and Amsterdam Stock Markets in the Eighteenth Century," The Journal of Economic History, Cambridge University Press, vol. 47(1), pages 97-115, March.
    43. Goetzmann, William N. & Huang, Simon, 2018. "Momentum in Imperial Russia," Journal of Financial Economics, Elsevier, vol. 130(3), pages 579-591.
    44. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
    45. Richard S. Grossman & Ronan C. Lyons & Kevin Hjortshøj O'rourke & Madalina A. Ursu, 2014. "A monthly stock exchange index for Ireland, 1864–1930," European Review of Economic History, European Historical Economics Society, vol. 18(3), pages 248-276.
    46. David LE BRIS, 2013. "Why did French Savers buy Foreign Assets before 1914? A Decomposition of the Benefits from Diversification," Discussion Papers (REL - Recherches Economiques de Louvain) 2013033, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    Full references (including those not matched with items on IDEAS)

    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. Rebecca Stuart, 2022. "Stock Return Predictability before the First World War," IRENE Working Papers 22-02, IRENE Institute of Economic Research.
    2. Gareth Campbell & Meeghan Rogers, 2017. "Integration between the London and New York Stock Exchanges, 1825–1925," Economic History Review, Economic History Society, vol. 70(4), pages 1185-1218, November.
    3. Esteves, Rui & Eichengreen, Barry, 2019. "The Trials of the Trilemma: International Finance 1870-2017," CEPR Discussion Papers 13465, C.E.P.R. Discussion Papers.
    4. Qin, Weiping & Cho, Sungjun & Hyde, Stuart, 2022. "Measuring market integration during crisis periods," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 78(C).
    5. Bekaert, Geert & Mehl, Arnaud, 2019. "On the global financial market integration “swoosh” and the trilemma," Journal of International Money and Finance, Elsevier, vol. 94(C), pages 227-245.
    6. Volosovych, Vadym, 2011. "Measuring financial market integration over the long run: Is there a U-shape?," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1535-1561.
    7. Billio, M. & Donadelli, M. & Paradiso, A. & Riedel, M., 2017. "Which market integration measure?," Journal of Banking & Finance, Elsevier, vol. 76(C), pages 150-174.
    8. Turner, John D., 2014. "Financial history and financial economics," QUCEH Working Paper Series 14-03, Queen's University Belfast, Queen's University Centre for Economic History.
    9. Oosterlinck, Kim & Accominotti, Olivier & BRIERE, Marie & Burietz, Aurore & Szafarz, Ariane, 2020. "Did Globalization Kill Contagion?," CEPR Discussion Papers 14395, C.E.P.R. Discussion Papers.
    10. Jérémy Ducros & Angelo Riva, 2014. "The Lyon Stock Exchange: A Struggle for Survival (1866-1914)," PSE Working Papers halshs-00960528, HAL.
    11. Richard S. Grossman, 2015. "Bloody foreigners! Overseas equity on the London Stock Exchange, 1869–1929," Economic History Review, Economic History Society, vol. 68(2), pages 471-521, May.
    12. He, Hongbo & Chen, Yiqing & Wan, Hong & Yao, Shujie, 2023. "Possibility versus feasibility: International portfolio diversification under financial liberalization," International Review of Financial Analysis, Elsevier, vol. 87(C).
    13. Marc Flandreau & Juan H. Flores & Norbert Gaillard & Sebastián Nieto-Parra, 2010. "The End of Gatekeeping: Underwriters and the Quality of Sovereign Bond Markets, 1815–2007," NBER Chapters, in: NBER International Seminar on Macroeconomics 2009, pages 53-92, National Bureau of Economic Research, Inc.
    14. Mika Vaihekoski, 2024. "Revisiting Stock Market Index for the Helsinki Stock Exchange 1912–1981," JRFM, MDPI, vol. 17(3), pages 1-14, February.
    15. Wagner, Alexander F. & Schrimpf, Paul & Petzev, Ivan, 2015. "Has the Pricing of Stocks Become More Global?," CEPR Discussion Papers 10966, C.E.P.R. Discussion Papers.
    16. Donadelli, Michael & Paradiso, Antonio, 2014. "Is there heterogeneity in financial integration dynamics? Evidence from country and industry emerging market equity indexes," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 184-218.
    17. Kim, Kyungkeun & Lee, Dongwon, 2020. "Equity market integration and portfolio rebalancing," Journal of Banking & Finance, Elsevier, vol. 113(C).
    18. Kuvshinov, Dmitry & Zimmermann, Kaspar, 2022. "The big bang: Stock market capitalization in the long run," Journal of Financial Economics, Elsevier, vol. 145(2), pages 527-552.
    19. Biplab Bhattacharjee & Muhammad Shafi & Animesh Acharjee, 2017. "Investigating the Evolution of Linkage Dynamics among Equity Markets Using Network Models and Measures: The Case of Asian Equity Market Integration," Data, MDPI, vol. 2(4), pages 1-28, December.
    20. Cakici, Nusret & Zaremba, Adam, 2023. "Misery on Main Street, victory on Wall Street: Economic discomfort and the cross-section of global stock returns," Journal of Banking & Finance, Elsevier, vol. 149(C).

    More about this item

    Keywords

    stock returns; principal components analysis; Gold Standard.;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • N2 - Economic History - - Financial Markets and Institutions

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:irn:wpaper:21-01. 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: Siwar Khelifa (email available below). General contact details of provider: https://edirc.repec.org/data/irenech.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.