{"title":"Strangling speculation: the effect of the 1903 Viennese futures trading ban","authors":"Laura Wurm","doi":"10.1007/s11698-024-00294-3","DOIUrl":null,"url":null,"abstract":"<p>How does futures trading affect the intra-day volatility of spot prices? This paper contributes to the historical work on commodity markets, by using a unique early twentieth-century natural experiment to test what happens when futures trading no longer exists. In 1903, in an attempt to eliminate speculative behavior, futures trading in the Viennese grain market was banned. The permanency of this ban makes it ideal for studying its effect on volatility, using a difference-in-difference framework. Prices from Budapest, a market operating under similar conditions, sharing the same harvest regions, and embedded in a similar legal framework, are used as a control. The Budapest market constitutes an ideal control because it was unaffected by the ban and any migration of Austrian trading parties to this market was prohibited by law. This paper finds an increased intra-day volatility of spot prices and lower pricing accuracy on the Viennese spot market after the ban in comparison with Budapest, as the information-transmission and risk-allocation functions of this city’s futures market were no longer maintained.</p>","PeriodicalId":44951,"journal":{"name":"Cliometrica","volume":null,"pages":null},"PeriodicalIF":1.5000,"publicationDate":"2024-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Cliometrica","FirstCategoryId":"98","ListUrlMain":"https://doi.org/10.1007/s11698-024-00294-3","RegionNum":1,"RegionCategory":"历史学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
How does futures trading affect the intra-day volatility of spot prices? This paper contributes to the historical work on commodity markets, by using a unique early twentieth-century natural experiment to test what happens when futures trading no longer exists. In 1903, in an attempt to eliminate speculative behavior, futures trading in the Viennese grain market was banned. The permanency of this ban makes it ideal for studying its effect on volatility, using a difference-in-difference framework. Prices from Budapest, a market operating under similar conditions, sharing the same harvest regions, and embedded in a similar legal framework, are used as a control. The Budapest market constitutes an ideal control because it was unaffected by the ban and any migration of Austrian trading parties to this market was prohibited by law. This paper finds an increased intra-day volatility of spot prices and lower pricing accuracy on the Viennese spot market after the ban in comparison with Budapest, as the information-transmission and risk-allocation functions of this city’s futures market were no longer maintained.
期刊介绍：
Cliometrica provides a leading forum for exchange of ideas and research in all facets, in all historical periods and in all geographical locations of historical economics. The journal encourages the methodological debate, the use of economic theory in general and model building in particular, the reliance upon quantification to buttress the models with historical data, the use of the more standard historical knowledge to broaden the understanding and suggesting new avenues of research, and the use of statistical theory and econometrics to combine models with data in a single consistent explanation. The highest standards of quality are promoted. All articles will be subject to Cliometrica''s peer review process. On occasion, specialised topics may be presented in a special issue.
Officially cited as: Cliometrica
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