The Boats That Did Not Sail: Asset Price Volatility in a Natural Experiment

Peter Koudijs
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Peter Koudijs: Stanford University

Research Papers from Stanford University, Graduate School of Business

Abstract: What explains short term fluctuations of stock prices? This paper exploits a natural experiment from the 18th century in which information flows were regularly interrupted for exogenous reasons. English shares were traded on the Amsterdam exchange and news came in on sailing boats that were often delayed because of adverse weather conditions. The paper documents that prices responded strongly to boat arrivals, but that there was considerable volatility in the absence of news. Results suggest that this was largely the result of the revelation of (long-lived) private information and the (transitory) impact of uninformed liquidity trades on intermediaries' risk premia.

JEL-codes: G14 N20 (search for similar items in EconPapers)
Date: 2014-08
New Economics Papers: this item is included in nep-his and nep-mfd
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:3186

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