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

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  • Koudijs, Peter

    (Stanford University)

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.

Suggested Citation

  • Koudijs, Peter, 2014. "The Boats That Did Not Sail: Asset Price Volatility in a Natural Experiment," Research Papers 3186, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:3186
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    File URL: http://www.gsb.stanford.edu/faculty-research/working-papers/boats-did-not-sail-asset-price-volatility-natural-experiment
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    Cited by:

    1. Benjamin Golez & Peter Koudijs, 2014. "Four Centuries of Return Predictability," NBER Working Papers 20814, National Bureau of Economic Research, Inc.
    2. Anais Maillet, 2015. "Food price volatility and farmers' production decisions under imperfect information," FOODSECURE Technical papers 8, LEI Wageningen UR.

    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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