The Krach of 1882, the Bourse De Paris and the Importance of Microstructure

33 Pages Posted: 4 Dec 2006

See all articles by Eugene N. White

Eugene N. White

Rutgers University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: November 2006

Abstract

The crash of the French stock market in 1882 presented the Paris Bourse with its worst crisis of the late nineteenth century. Three features of exchange's microstructure, a dominant forward market, a small number of brokers, and a common fund that guaranteed brokers' transactions, amplified the collapse. Using new archival data, this paper shows that the bourse's common fund, designed to guarantee the liquidity of the exchange from idiosyncratic shocks, made it susceptible to systemic shocks. Only an emergency loan from the Bank of France saved the bourse. Neither the New York nor the London exchanges, which had very different structures, experienced similar liquidity crises.

Keywords: stock market crash, bourse, microstructure

JEL Classification: N23, G10

Suggested Citation

White, Eugene Nelson, The Krach of 1882, the Bourse De Paris and the Importance of Microstructure (November 2006). Available at SSRN: https://ssrn.com/abstract=948993 or http://dx.doi.org/10.2139/ssrn.948993

Eugene Nelson White (Contact Author)

Rutgers University - Department of Economics ( email )

75 Hamilton Street
New Brunswick, NJ 08901
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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