{"title":"The 1929 crash of the New York stock exchange as a liquidity crisis","authors":"Jean-Laurent Cadorel","doi":"10.1111/ehr.13309","DOIUrl":null,"url":null,"abstract":"<p>What caused the 1929 crash of the New York Stock Exchange? This paper quantitatively studies liquidity during the 1929 crash of the NYSE. I evidence that the crash represented a liquidity crisis due to the liquidation of brokers’ margin loans. Applying recent estimators of effective spreads and liquidity conditions from contemporary finance literature suggests a four-fold increase in spreads during the crash at the aggregate level. At the individual stock level, quoted bid-ask spreads suggest that liquidity explains one-fifth of the variance in daily stock returns during the crash.</p>","PeriodicalId":47868,"journal":{"name":"Economic History Review","volume":"77 4","pages":"1197-1221"},"PeriodicalIF":1.4000,"publicationDate":"2024-01-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Economic History Review","FirstCategoryId":"98","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/ehr.13309","RegionNum":1,"RegionCategory":"历史学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
What caused the 1929 crash of the New York Stock Exchange? This paper quantitatively studies liquidity during the 1929 crash of the NYSE. I evidence that the crash represented a liquidity crisis due to the liquidation of brokers’ margin loans. Applying recent estimators of effective spreads and liquidity conditions from contemporary finance literature suggests a four-fold increase in spreads during the crash at the aggregate level. At the individual stock level, quoted bid-ask spreads suggest that liquidity explains one-fifth of the variance in daily stock returns during the crash.
期刊介绍：
The Economic History Review is published quarterly and each volume contains over 800 pages. It is an invaluable source of information and is available free to members of the Economic History Society. Publishing reviews of books, periodicals and information technology, The Review will keep anyone interested in economic and social history abreast of current developments in the subject. It aims at broad coverage of themes of economic and social change, including the intellectual, political and cultural implications of these changes.
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