Volatility Clustering and the Bid-Ask Spread: Exchange Rate Behavior in Early Renaissance Florence

25 Pages Posted: 13 Mar 2008

See all articles by G. Geoffrey Booth

G. Geoffrey Booth

Michigan State University - Department of Finance

Umit Gurun

University of Texas at Dallas

Multiple version iconThere are 2 versions of this paper

Abstract

This paper investigates the nature and behavior of the domestic (local) currency market that existed in Florence (Italy) during the late 14th and early 15th centuries (a.k.a. Early Renaissance). We find that the extant volatility and microstructure models developed for modern asset markets are able to describe the statistical volatility properties observed for the denaro-florin exchange rate. Volatility is clustered and is related to the bid-ask spread. This supports the notion that, although there are huge social, industrial and technological differences between capitalism then and now, individuals trading financial assets in an organized venue behave in a similar manner.

Keywords: Volatility clustering, bid ask spread, Exchange rate, Renaissance

JEL Classification: G10, N23, P12

Suggested Citation

Booth, G. Geoffrey and Gurun, Umit, Volatility Clustering and the Bid-Ask Spread: Exchange Rate Behavior in Early Renaissance Florence. Journal of Empirical Finance, Vol. 15, No. 1, 2008. Available at SSRN: https://ssrn.com/abstract=1105482

G. Geoffrey Booth

Michigan State University - Department of Finance ( email )

315 Eppley Center
East Lansing, MI 48824-1122
United States
(517) 353-1745 (Phone)
(517) 432-1080 (Fax)

Umit Gurun (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

HOME PAGE: http://www.umitgurun.com

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