What Happened to Liquidity When World War I Shut the Nyse?

31 Pages Posted: 11 Nov 2008

See all articles by William L. Silber

William L. Silber

New York University (NYU) - Leonard N. Stern School of Business; New York University (NYU) - Department of Finance

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Date Written: August 2003

Abstract

The suspension of trading on the New York Stock Exchange for more than four months following the outbreak of World War I fostered a substitute market on New Street as a source of liquidity. The New Street market suffered from a lack of price transparency because its transactions were not disseminated on the NYSE ticker and its quotations were blacklisted at the leading newspapers. This paper shows that despite the impaired information flow and the somewhat wider bid-ask spreads compared with the New York Stock Exchange, New Street offered economically meaningful liquidity services. The absence of price transparency turned an individual stock’s reputation for liquidity into an important variable in explaining the structure of bid-ask spreads on New Street

Suggested Citation

Silber, William L., What Happened to Liquidity When World War I Shut the Nyse? (August 2003). NYU Working Paper No. 2451/26750, Available at SSRN: https://ssrn.com/abstract=1299393

William L. Silber (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

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New York University (NYU) - Department of Finance ( email )

Stern School of Business
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New York, NY 10012-1126
United States

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