Abstract
<em>The study analyzes a unique time period of sustained deflation from 1867 to 1896, followed by sustained reflation after 1896. We use these periods to test two hypotheses concerning the impact on NYSE trading volumes and seat prices. The first is the “liquidity-trading” hypothesis, which hypothesizes that liquidity trading, a component of total trading volume, is positively correlated with interest rates. The second is the price-volume relationship, which hypothesizes a positive relationship between stock prices returns and changes in trading volume. These hypotheses suggest that NYSE trading volume should fall (rise) with falling (rising) stock prices and interest rates. We find strong support for both hypotheses, and additionally show that the impact of stock market prices on trading volumes is highly asymmetrical. As well, the study argues and finds evidence that the high level of systematic risk found in the pricing of NYSE seats is another reflection of the price-volume relationship. Therefore, the study finds strong evidence of a link between deflation, reflation and market liquidity as reflected in trading volumes and the pricing of NYSE seats.</em>
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
