The highest price ever: The great NYSE seat sale of 1928-1929 and capacity constraints

Lance E. Davis, Larry Neal, Eugene White

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

During the 1920s the New York Stock Exchange's position as the dominant American exchange was eroding. Costs to customers, measured as bid-ask spreads, spiked when surging inflows of orders collided with the constraint created by a fixed number of brokers. The NYSE's management proposed and the membership approved a 25 percent increase in the number of seats by issuing a quarter-seat dividend to all members. An event study reveals that the aggregate value of the NYSE rose in anticipation of improved competitiveness. These expectations were justified as bid-ask spreads became less sensitive to peak volume days.

Original languageEnglish (US)
Pages (from-to)705-739
Number of pages35
JournalJournal of Economic History
Volume67
Issue number3
DOIs
StatePublished - Sep 2007

All Science Journal Classification (ASJC) codes

  • History
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)

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