, Volume 10, Issue 1, pp 5–30 | Cite as

Time-varying price discovery in the eighteenth century: empirical evidence from the London and Amsterdam stock markets

  • Adrian R. Bell
  • Chris Brooks
  • Nick Taylor
Original Paper


This paper examines the time-varying nature of price discovery in eighteenth century cross-listed stocks. Specifically, we investigate how quickly news is reflected in prices for two of the great moneyed companies, the Bank of England and the East India Company, over the period 1723–1794. These British companies were cross-listed on the London and Amsterdam stock exchange and news between the capitals flowed mainly via the use of boats that transported mail. We examine in detail the historical context surrounding the defining events of the period and use these as a guide to how the data should be analysed. We show that both trading venues contributed to price discovery, and although the London venue was more important for these stocks, its importance varies over time.


Arbitrage Information shares Cross-listed stocks  Historical finance Eighteenth century stocks 

JEL Classification

N230 G140 C320 



The authors are grateful to Gary Shea for kindly providing us with his data on the dividend payments for the companies. We are also grateful for useful comments on previous versions of this paper by the Founding Managing Editor, Claude Diebolt, and two anonymous referees.


  1. Aitken M, Di Marco E, Harris F (2012) Price discovery efficiency and information impounding on NYSE Euronext Paris. SSRN working paper
  2. Beach B, Norman S, Wills D (2013) Time or spot? A revaluation of Amsterdam market data prior to 1747. Cliometrica 7:61–85CrossRefGoogle Scholar
  3. Bowen H (1989) Investment and empire in the later eighteenth century: east India stockholding, 1756–1791. Econ Hist Rev 42:186–206CrossRefGoogle Scholar
  4. Booth G, So R, Tse Y (1999) Price discovery in the German equity index derivatives market. J Futures Mark 19:619–643CrossRefGoogle Scholar
  5. Campbell B, Hendry S (2007) Price discovery in Canadian and U.S. 10-Year government bond markets. Bank of Canada working paper 2007–43Google Scholar
  6. Caporale G, Girardi A (2013) Price discovery and trade fragmentation in a multi-market environment: evidence from the MTS system. J Bank Finance 37:227–240CrossRefGoogle Scholar
  7. Chan K, Menkveld A, Yang Z (2007) The informativeness of domestic and foreign investors’ stock trades: evidence from the perfectly segmented Chinese market. J Financ Mark 10:391–415CrossRefGoogle Scholar
  8. Chakravarty S, Gulen H, Mayhew S (2004) Informed trading in stock and option markets. J Finance 59:1235–1257CrossRefGoogle Scholar
  9. Chu Q, Hsieh W, Tse Y (1999) Price discovery on the S&P 500 index markets: an analysis of spot index, index futures and SPDRs. Int Rev Financ Anal 8:21–34CrossRefGoogle Scholar
  10. Dale R (2004) The first crash: lessons from the South Sea Bubble. Princeton University Press, PrincetonGoogle Scholar
  11. Davison A, Hinkley D (1997) Bootstrap methods and their application. Cambridge series in statistical and probabilistic mathematics. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  12. Dempster G, Wells J, Wills D (2000) A common-features analysis of Amsterdam and London financial markets during the eighteenth century. Econ Inquiry 38:19–33CrossRefGoogle Scholar
  13. Harris F, McInish T, Wood R (2002) Security price adjustment across exchanges: an investigation of common factor components for Dow stocks. J Financ Mark 5:277–308CrossRefGoogle Scholar
  14. Harrison P (1998) Similarities in the distribution of stock market price changes between the eighteenth and twentieth Centuries. J Bus 71:55–79CrossRefGoogle Scholar
  15. Hasbrouck J (1995) One security, many markets: determining the contributions to price discovery. J Finance 50:1175–1199CrossRefGoogle Scholar
  16. Hoag C, Norman S (2013) Transatlantic capital market price discovery during a financial crisis. Bull Econ Res 65:1–9CrossRefGoogle Scholar
  17. Homer S, Sylla R (2005) A history of interest rates, 4th edn. Wiley, ChichesterGoogle Scholar
  18. Huang R (2002) The quality of ECN and Nasdaq market maker quotes. J Finance 57:1285–1319CrossRefGoogle Scholar
  19. Koudijs P (2013) The boats that did not sail: Evidence on the sources of asset price volatility from an 18th century natural experiment. NBER Working Paper No. 18831Google Scholar
  20. Lehmann B (2002) Some desiderata for the measurement of price discovery across markets. J Financ Mark 5:259–276CrossRefGoogle Scholar
  21. Lütkepohl H (1991) Introduction to multiple time series analysis. Springer, BerlinCrossRefGoogle Scholar
  22. Mackay C (1995) Extraordinary popular delusions and the madness of crowds. Crown Publications, LondonGoogle Scholar
  23. Mammen E (1993) Bootstrap and wild bootstrap for high dimensional linear models. Ann Stat 21:255–285CrossRefGoogle Scholar
  24. Mizrach B, Otsubo Y (2014) The market microstructure of the European climate exchange. J Bank Financ 39:107–116CrossRefGoogle Scholar
  25. Neal L (1985) Integration of international capital markets: quantitative evidence from the eighteenth to twentieth centuries. J Econ Hist 45:219–226CrossRefGoogle Scholar
  26. Neal L (1987) The integration and efficiency of the London and Amsterdam stock markets in the eighteenth century. J Econ Hist 47:97–115CrossRefGoogle Scholar
  27. Neal L (1990) The rise of financial capitalism. Cambridge University Press, New YorkGoogle Scholar
  28. Pascual R, Pascual-Fuster B, Climent F (2006) Cross-listing, price discovery and the informativeness of the trading process. J Financ Mark 9:144–161CrossRefGoogle Scholar
  29. Pesaran H, Shin Y (1996) Cointegration and speed of convergence to equilibrium. J Econom 71:117–143CrossRefGoogle Scholar
  30. Pesaran H, Shin Y (1998) Generalized impulse response analysis in linear multivariate models. Econ Lett 58:17–29CrossRefGoogle Scholar
  31. Shea G (2000) The course of the exchange: Measuring and interpreting returns processes in 18th and early 19th century Britain. Mimeo, Department of Economics, University of St. AndrewsGoogle Scholar
  32. Stock J, Watson M (1988) Testing for common trends. J Am Stat Assoc 83:1097–1107CrossRefGoogle Scholar
  33. Van Dillen JG (1931) Effectenkoersen aan de Amsterdamsche Beurs, 1723–1794. Economische Historische Jaarboek 17:1–46Google Scholar
  34. Wilson C (1941) Anglo-Dutch commerce and finance in the eighteenth century. Cambridge University Press, CambridgeGoogle Scholar
  35. Wright J (1999) British government borrowing in wartime, 1750–1815. Econ Hist Rev 52:355–361CrossRefGoogle Scholar
  36. Yan B, Zivot E (2010) A structural analysis of price discovery measures. J Financ Mark 13:1–19CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  1. 1.ICMA Centre, Henley Business SchoolUniversity of ReadingReadingUK
  2. 2.School of Economics, Finance and ManagementUniversity of BristolBristolUK

Personalised recommendations