Business Activity and the Boston Stock Market, 1835-1869
This paper examines the performance of the Boston stock market, the nation's premier market for industrials, between 1835 and 1869, developing new indexes of price performance, dividend yields and total holding period returns for bank stocks and industrial equities using annual data from Martin (1871). Using these new series and a set of VAR models we conclude that disturbances in the banking sector, as manifested by declines in total stockholder returns, led to increases in short-term lending rates which in turn led to declines in the price performance of traded manufacturing firms. There is no evidence of feedback from manufacturing returns to bank stock prices via lending rates. The findings are consistent with a key role for banks in nineteenth century business fluctuations
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Antebellum average bank stock prices banking and manufacturing banking sector banking total returns Bateman and Weiss BLS prices Boston Daily Advertiser Boston Statesman Boston Stock Exchange Boston stock market business cycle capital gains Capital Weighted capital-weighted series changes in lending coefficients cointegrated commercial paper correlation correspond to Figure Coverage cross-correlations descriptions of Section differenced dividend yields Economic Equal Wt Equally Weighted equally-weighted equation example F-test Figure IIIb Figure IVa Granger-cause changes high price holding period returns indexes for traded industrials interest rates investors Legend Capital lending rates LINT low prices Manufacturing Dividend manufacturing equities manufacturing price index manufacturing returns manufacturing sector Margo Martin Martin's data Model NBER Working Papers non-stationary null hypothesis number of firms period price appreciation price performance sample securities shares specification standard deviation stationarity TABLE total bank returns traded bank stocks Traded Manufacturing Stocks unit root Vector Autoregressive weighted both equally