The Crisis of 1873: Perspectives from Multiple Asset Classes

The Journal of Economic History, Vol. 68, No. 3, pp. 722-757, September 2008

58 Pages Posted: 29 Jul 2005 Last revised: 6 Oct 2008

See all articles by Scott Mixon

Scott Mixon

Commodity Futures Trading Commission

Date Written: September 2008

Abstract

This paper analyzes asset pricing behavior during the period leading up to the Crisis of 1873. Evidence is presented that equities, options, and bonds priced risks consistently, suggesting that investors were actively monitoring the risk of investing and were not caught up in an irrational, speculative mania. Implied probability density functions for stock returns suggest that option markets exhibited growing concern about substantial price declines prior to the crash. Concerns were concentrated on riskier, more leveraged firms with uncertain prospects. Deteriorating balance sheet fundamentals for the riskiest U.S. railroads set the stage for a market disruption in 1873 as information asymmetries worsened.

Keywords: Crisis of 1873, options, implied distribution

JEL Classification: N21, G13

Suggested Citation

Mixon, Scott, The Crisis of 1873: Perspectives from Multiple Asset Classes (September 2008). The Journal of Economic History, Vol. 68, No. 3, pp. 722-757, September 2008. Available at SSRN: https://ssrn.com/abstract=761964

Scott Mixon (Contact Author)

Commodity Futures Trading Commission ( email )

1155 21st Street NW
Washington, DC 20581
United States

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