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European Review of Economic History

Liquidity Premia During the Industrial Breakthrough: Evidence from the Stockholm Stock Exchange, 1901–1919

Vetenskaplig artikel på engelska
Referens
Gernandt, Otto, Thomas Palm och Daniel Waldenström (2012). ”Liquidity Premia During the Industrial Breakthrough: Evidence from the Stockholm Stock Exchange, 1901–1919”. European Review of Economic History 16(3), 247–269. doi.org/10.1093/ereh/hes002

Författare
Otto Gernandt, Thomas Palm, Daniel Waldenström

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.

Daniel Waldenström

+46 (0)8 665 4584
+46 70 491 6082
daniel.waldenstrom@ifn.se