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

25 Pages Posted: 19 Jan 2012

See all articles by Umit Gurun

Umit Gurun

University of Texas at Dallas

G. Geoffrey Booth

Michigan State University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: April 13, 2004

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: Market microstructure, Asymmetric information, Volatility clustering, Early markets

JEL Classification: G10, N23, P12

Suggested Citation

Gurun, Umit and Booth, G. Geoffrey, Volatility Clustering and the Bid-Ask Spread: Exchange Rate Behavior in Early Renaissance Florence (April 13, 2004). Available at SSRN: https://ssrn.com/abstract=518122 or http://dx.doi.org/10.2139/ssrn.518122

Umit Gurun

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

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

G. Geoffrey Booth (Contact Author)

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)

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