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The Relation between Stock Market Movements and NYSE Seat Prices
Author(s) -
Keim Donald B.,
Madhavan Ananth
Publication year - 2000
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/0022-1082.00308
Subject(s) - proxy (statistics) , stock market , financial economics , economics , stock exchange , predictive power , econometrics , stock (firearms) , market price , monetary economics , business , microeconomics , finance , mathematics , statistics , philosophy , mechanical engineering , paleontology , horse , engineering , biology , epistemology
Exchange seat prices are widely reported and followed as measures of market sentiment. This paper analyzes the information content of NYSE seat prices using: (1) annual seat prices from 1869 to 1998, and (2) the complete record of trades, bids and offers for the seat market from 1973 to 1994. Seat market volumes have predictive power regarding future stock market returns, consistent with a model where seat market activity is a proxy for unobserved factors affecting expected returns. We find abnormally large price movements in seats prior to October 1987, consistent with the hypothesis that seat prices capture market sentiment.