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The Extralegal Development of Securities Trading in Seventeenth Century Amsterdam


Edward Peter Stringham


Fayetteville State University - School of Business and Economics

December 18, 2001

Quarterly Review of Economics and Finance, Vol. 43, No. 2, p. 321, 2003

Abstract:     
It is often argued that government rule enforcement is necessary for the development of a stock market (Glaeser, Johnson, & Shleifer, 2001). Work by Boot, Stuart, and Thakor (1993), Klein and Leffler (1981), and Telser (1980), however, suggests that repeated interaction and reputation can create incentives for contracts to be self-enforcing. This paper investigates these claims by examining the first stock market, the Amsterdam Bourse. At a time when many financial contracts were unenforceable in government courts the market developed surprisingly advanced trading instruments. Descriptions by seventeenth-century stockbroker, De la Vega [Confusion de Confusiones], indicate that a reputation mechanism enabled extralegal trading of relatively sophisticated contracts including short sales, forward contracts, and options.

Number of Pages in PDF File: 24

Keywords: Extralegal, Enforcement, Reputation

JEL Classification: L14, N23, G28

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Date posted: September 16, 2010  

Suggested Citation

Stringham, Edward Peter, The Extralegal Development of Securities Trading in Seventeenth Century Amsterdam (December 18, 2001). Quarterly Review of Economics and Finance, Vol. 43, No. 2, p. 321, 2003. Available at SSRN: http://ssrn.com/abstract=1676251

Contact Information

Edward Peter Stringham (Contact Author)
Fayetteville State University - School of Business and Economics ( email )
Fayetteville, NC 28301
United States
HOME PAGE: http://www.uncfsu.edu/sbe/HackleyChair/Stringham_Bio.htm
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