Deflation and Reflation: The Pre-WW I Impact on NYSE Trading Volumes and Seat Prices

44 Pages Posted: 25 Jul 2015

Date Written: July 23, 2015


The study analyzes a unique time period of sustained deflation from 1867 to 1896, followed by sustained reflation after 1896. We use these periods to test two hypotheses concerning the impact on NYSE trading volumes and seat prices. The first is the “liquidity-trading” hypothesis, which hypothesizes that liquidity trading, a component of total trading volume, is positively correlated with interest rates. The second is the price-volume relationship, which hypothesizes a positive relationship between stock prices returns and changes in trading volume. These hypotheses suggest that NYSE trading volume should fall (rise) with falling (rising) stock prices and interest rates. We find strong support for both hypotheses, and additionally show that the impact of stock market prices on trading volumes is highly asymmetrical. As well, the study argues and finds evidence that the high level of systematic risk found in the pricing of NYSE seats is another reflection of the price-volume relationship. Therefore, the study finds strong evidence of a link between deflation, reflation and market liquidity as reflected in trading volumes and the pricing of NYSE seats.

Keywords: deflation, reflation, liquidity trading, price-volume relationship, NYSE seat pricing

JEL Classification: G12, G24, N11

Suggested Citation

Wilson, Berry K. and McSherry, Bernard, Deflation and Reflation: The Pre-WW I Impact on NYSE Trading Volumes and Seat Prices (July 23, 2015). Available at SSRN: or

Berry K. Wilson (Contact Author)

Pace University ( email )

One Pace Plaza
White Plains, NY New York 10603
United States

Bernard McSherry

New Jersey City University ( email )

2039 Kennedy Boulevard
Jersey City, NJ 07305-1597
United States

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