Hostname: page-component-78c5997874-g7gxr Total loading time: 0 Render date: 2024-11-20T01:30:13.319Z Has data issue: false hasContentIssue false
  • English
  • Français

The Highest Price Ever: The Great NYSE Seat Sale of 1928–1929 and Capacity Constraints

Published online by Cambridge University Press:  10 September 2007

Lance E. Davis ,
Larry Neal  and
Eugene White
Lance E. Davis
Affiliation:
Professor Emeritus, Humanities and Social Sciences, California Institute of Technology, Pasadena, CA 91125, and Research Associate, NBER. E-mail: [email protected].
Larry Neal
Affiliation:
Professor Emeritus, Department of Economics, University of Illinois, Urbana, IL 61801, and Research Associate, NBER. E-mail: [email protected].
Eugene White
Affiliation:
Professor, Department of Economics, Rutgers University, New Brunswick, New Jersey 08901, and Research Associate, NBER. E-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

During the 1920s the New York Stock Exchange's position as the dominant American exchange was eroding. Costs to customers, measured as bid-ask spreads, spiked when surging inflows of orders collided with the constraint created by a fixed number of brokers. The NYSE's management proposed and the membership approved a 25 percent increase in the number of seats by issuing a quarter-seat dividend to all members. An event study reveals that the aggregate value of the NYSE rose in anticipation of improved competitiveness. These expectations were justified as bid-ask spreads became less sensitive to peak volume days.

Type
ARTICLES
Information
The Journal of Economic History , Volume 67 , Issue 3 , September 2007 , pp. 705 - 739
Copyright
© 2007 The Economic History Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Arnold Tom, Philip Hersch, J. Harold Mulerin, and Jeffry Netter. “Merging Markets.” Journal of Finance 64, no. 3 (1998): 1083–107.Google Scholar
Binder John J. “The Event Study Methodology since 1969.” Review of Quantitative Finance and Accounting 11 (1998): 111–37.Google Scholar
Board of Governors of the Federal Reserve. Banking and Monetary Statistics. Washington, DC: Board of Governors of the Federal Reserve, 1943.
Campbell John Y., Andrew W. Lo, and A. Craig MacKinlay. The Econometrics of Financial Markets. Princeton, NJ: Princeton University Press, 1997.
Chicago Stock Exchange. The Chicago Stock Exchange: A Record of Progress. Chicago: Chicago Stock Exchange, 1930.
Commercial and Financial Chronicle.
Commercial and Financial Chronicle. Bond and Quotation Record, Supplement.
Davis Lance E., Larry Neal, and Eugene N. White. “The Highest Price Ever: The Great NYSE Seat Sale of 1928–1929 and Capacity Constraints.” NBER Working Paper no. 11556, August 2005.
Demsetz Harold, “The Cost of Transacting.” The Quarterly Journal of Economics 82, no. 1 (1968): 33–53.Google Scholar
Easley D., and Maureen O'Hara. “Price, Trade Size, and Information in Securities Markets.” Journal of Financial Economics 19 (1987): 69–90.Google Scholar
Golbe Devra L. “Negotiated Commissions, Rule 394 and the Risk and Return to New York Stock Exchange Seat Ownership.” Princeton Financial Research Center Memorandum no. 52, (1984).
Golbe Devra L. “Has Deregulation Decreased the Risk of NYSE Seat Ownership?” Economic Letters 5 (1986): 283–89.Google Scholar
Goldman Samuel P. A Handbook of Stock Exchange Laws, Affecting members, their customers, brokers and investors. New York: Doubleday, Page and Company, 1914.
Jarrell Gregg A. “Change at the Exchange: The Causes and Effects of Deregulation.” Journal of Law and Economics 27, no. 2 (1984): 273–307.Google Scholar
Jones Charles M. “A Century of Stock Market Liquidity and Trading Costs.” Graduate School of Business, Columbia University, mimeo (2002).
Keim Donald B. and Anath Madhavan. “The Information Contained in Stock Exchange Seat Prices.” New York Stock Exchange Working Paper, February 1997.
Keim Donald B. “The Relation between Stock Market Movements and NYSE Seat Prices.” Journal of Finance 55, no. 8 (2000): 2817–40.Google Scholar
Laux Paul. “Trade Sizes and Theories of the Bid-Ask Spread.” Journal of Financial Research 16, no. 3 (1983): 237–49.Google Scholar
Madhavan Anath, “Market Microstructure: A Survey.” Journal of Financial Markets 3 (2000): 205–58.Google Scholar
Meeker J. Edward. The Work of the Stock Exchange. New York: The Ronald Press Company, 1922.
Menyah Kojo and Krishna Paudyal. “The Determinants and Dynamics of Bid-Ask Spreads on the London Stock Exchange.” Journal of Financial Research 19, no. 3 (1996): 377–94.Google Scholar
New York Curb Exchange. New York Curb Exchange: History, Organization. New York: New York Curb Exchange, 1929.
New York Stock Exchange. Archives, files 1928, 1929.
New York Stock Exchange. Committee on Admissions.
New York Stock Exchange. Minutes of the Governing Committee.
New York Stock Exchange. Report of the President, New York: New York Stock Exchange, various years.
New York Stock Exchange. Yearbook. New York: New York Stock Exchange, various years.
New York Stock Exchange. www.nyse.com. NYSE Statistics Archive.
New York Herald.
New York Times.
Poon Ser-Huang and Clive W. Granger. “Forecasting Volatility in Financial Markets.” Journal of Economic Literature 41, no. 2 (2003): 426–77.Google Scholar
Schwert G. William. “Public Regulation of National Securities Exchanges: A Test of the Capture Hypothesis.” Rand Journal of Economics 8, no. 1 (1977): 128–50.Google Scholar
Schwert G. William. “Stock Exchange Seats as Capital Assets.” Journal of Financial Economics 4 (1977): 51–78.Google Scholar
Sobel Robert. A History of the American Stock Exchange, 1921–1971. New York: Weybright and Talley, 1972.
Stoll Hans R. “The Supply of Dealer Services in Securities Markets.” Journal of Finance 33, no. 2 (1978): 1133–51.Google Scholar
Stoll Hans R. “Friction,” Journal of Finance 55, no. 4 (2000): 1479–514.Google Scholar
The World.
White Eugene N. “Anticipating the Stock Market Crash of 1929: The View from the Floor of the Exchange.” NBER Working Paper no. 12661, November 2006.