Liquidity premia during the industrial breakthrough: evidence from the Stockholm Stock Exchange, 1901-1919
2012 (English)In: European Review of Economic History, ISSN 1361-4916, E-ISSN 1474-0044, Vol. 16, no 3, 247-269 p.Article in journal (Refereed) Published
This paper analyzes the importance of liquidity in determining security returns for firms listed on the Stockholm Stock Exchange between 1901 and 1919. Using a new and detailed firm-level data set with matching stock price and balance sheet information, we construct new stock return indices as well as firm-specific liquidity measures for our empirical analysis. Our main finding is that there was a substantial illiquidity effect on returns. Securities in the 25th percentile of the liquidity distribution earned, on average, a 0.59 percent higher monthly return than securities in the 75th percentile. This effect is comparable with estimates from modern stock markets and suggests that the liquidity premium is not solely a modern phenomenon but could be an inherent characteristic of financial markets.
Place, publisher, year, edition, pages
2012. Vol. 16, no 3, 247-269 p.
IdentifiersURN: urn:nbn:se:uu:diva-179909DOI: 10.1093/ereh/hes002ISI: 000306671000002OAI: oai:DiVA.org:uu-179909DiVA: diva2:547228