Skip to main content Accessibility help
×
Home

The Expansion of the U.S. Stock Market, 1885–1930: Historical Facts and Theoretical Fashions

  • Mary O'Sullivan

Abstract

Based on an analysis of the leading trading markets for stock in the United States, I document the dramatic expansion that took place in the scale and scope of the country's stock market from the mid-1880s to the early 1930s. My analysis suggests that a broadbased stock market was a long way from being established even by the early teens. It took the impetus provided by World War I, plus the enthusiasm of the 1920s, to bring such a market into existence. I consider the capacity of today's fashionable theories, which link the development of stock markets to improvements in minority shareholder protection, to explain the growth of the U.S. stock market, and find that they cannot account for the historical patterns that I identify. However, I suggest that there are other arguments that are worthy of further consideration. First, there were factors, besides minority shareholder rights, that led to changes in the demand for corporate stocks during this period, especially an increase in the demand for stocks by institutional investors, notably banks and insurance companies, as well as the emergence of a retail market for stocks after World War I. Second, there were also important developments in the supply of corporate stocks after the War, including the issuance of stock to fund the expansion of young firms, but especially to facilitate mergers and acquisitions by established firms, which seem to have played an important role in driving the expansion of the U.S. stock market.

Copyright

References

Hide All

Books

Bernheim, Alfred, and Schneider, Margaret Grant. The Security Markets: Findings and Recommendations of a Special Staff of the Twentieth Century Fund. New York, 1935.
Bishop, George Jr.Charles H. Dow and the Dow Theory. New York, 1960.
Carosso, Vincent. Investment Banking in America. Cambridge, Mass., 1970.
Carter, Susan B., Gartner, Scott S., Haines, Michael R., Olmstead, Alan L., and Wright, Gavin. Historical Statistics ofthe United States, Millennial Edition On Line. Cambridge, U.K., 2006.
Chicago Stock Exchange. A Year of Growth, Year Book. Chicago, 1931.
Dice, Charles Amos. The Stock Market. London, 1926.
Dorr, Bradford. New York and Boston Bank Stocks. Cambridge, Mass., 1928.
Edwards, George. The Evolution of Finance Capitalism. London, 1938.
Evans, George H. Business Incorporations in the United States, 1800–1943. Cambridge, Mass., 1948.
Friedman, Lawrence. A HistoryofAmerican Law. New York, 1973.
Friend, Irwin. Activity on the Over-the-Counter Markets. Philadelphia, 1951.
Gourevitch, Peter, and Shinn, James. Political Power and Corporate Control: The New Global Politics of Corporate Governance. Princeton, N.J., 2005.
Horwitz, Morton. The Transformation of American Law, 1780–1860. Cambridge, Mass., 1977.
Jones, and Baker, . Profits and Dividends of America’s Second Largest Stock Market. New York, 1919.
Larcom, Russell. The Delaware Corporation. Baltimore, Md., 1937.
Leffler, George. The Stock Market. New York, 1957.
Loss, Louis. Securities Regulation. Boston, Mass., 1951.
Martin, Joseph Gregory. Martin’s Boston Stock Market: Eighty-eight years, from January 1, 1798, to January, 1886. Boston, Mass., 1886.
Meeker, J. Edward. The Work of the Stock Exchange. New York, 1922.
Michie, Ranald C. The London and New York Stock Exchanges, 1850–1914. London, 1987.
Nelson, Ralph. Merger Movements in American Industry, 1895–1956.Princeton, N.J., 1959.
Nelson, Samuel A. The Consolidated Stock Exchange of New York, Its History, Organization, Machinery and Methods. New York, 1907.
New York Curb Exchange. New York Curb Exchange History. New York, 1931.
New York Stock Exchange. NYSE Facts and Figures. Available at
Parrish, Michael. Securities Regulation and the New Deal. New Haven, Conn., 1970.
Rajan, Raghuram, and Zingales, Luigi. Saving Capitalism from the Capitalists: Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity. New York, 2003.
Rice, Wallace. The Chicago Stock Exchange: A History. Chicago, 1928.
Ripley, William. Main Street and Wall Street. Boston, Mass., 1927.
Roe, Mark. Strong Managers, Weak Owners: The Political Roots of American Corporate Finance. Princeton, N.J., 1994.
Seligman, Joel. The Transformation of Wall Street: A History of the Securities and Exchange Commission and Modern Corporate Finance. Boston, Mass., 1995.
Smith, E. Common Stocks as LongTerm Investments. New York, 1923.
Sobel, Robert. AMEX: A History of the American Stock Exchange, 1921–1971. Washington, D.C., 1972.
Sobel, Robert. The Big Board: A History of the New York Stock Market. Washington, D.C., 1975.
Sobel, Robert. The Curbstone Brokers: The Origins of the American Stock Exchange. Washington, D.C., 1970.
Stedman, Edmund, ed. The New York Stock Exchange: Its History, Its Contribution to National Prosperity, and its Relation to American Finance at the Outset ofthe Twentieth Century. New York, 1905.
Van Antwerp, William. The Stock Exchange from Within. New York, 1914.
Van Strum, K. Investing in Purchasing Power. New York, 1925.
Weil, Myron. The ABC and Manual of the Curb Market. New York, 1908.
Wright, Robert E. The First Wall Street: Chestnut Street, Philadelphia, andtheBirth of American Finance. Chicago, 2005.
Arnold, Tom, Hersch, Philip, Mulherin, J. Harold, and Netter, Jeffry. “Merging Markets.” Journal of Finance 54 (June 1999): 10831107.
Baskin, Jonathan. “The Development of Corporate Financial Markets in Britain and the United States, 1600–1914: Overcoming Asymmetric Information.” Business History Review 62 (Summer 1988): 199237.
Bebchuk, Lucian. “Federalism and the Corporation: The Desirable Limits on State Competition in Corporate Law.” Harvard Law Review 105 (May 1992): 14351510.
Benston, George. “The Value of the SEC’s Accounting Disclosure Requirements.” Accounting Review 44 (July 1969): 515–32.
Cary, William. “Federalism and Corporate Law: Reflections Upon Delaware.” Yale Law Journal 83 (March 1974): 663705.
Davis, Lance. “The Capital Markets and Industrial Concentration: The U.S. and U.K., a Comparative Study.” Economic History Review 19, no. 2 (1966): 255–72.
Dodd, Peter, and Leftwich, Richard. “The Market for Corporate Charters: ‘Unhealthy Competition’ versus Federal Regulation.” Journal of Business 53 (July 1980): 259–83.
Fischel, Daniel R. “Race to the Bottom Revisited: Reflections on Recent Developments in Delaware’s Corporation Law.” Northwestern University Law Review 76, no. 6 (1982): 913–45.
Garvy, George. “Rivals and Interlopers in the History of the New York Security Market.” Journal of Political Economy 52 (June 1944): 128–43.
Ginzburg, Benjamin. “Wall Street Under the New Deal.” North American Review 245 (Spring 1938): 5881.
Grandy, Christopher. “New Jersey Corporate Chartermongering, 1875–1929.” Journal of Economic History 49 (Sept. 1989): 677–92.
La Porta, Rafael, Lopez-de-Silanes, Florencio, Shleifer, Andrei, and Vishny, Robert W. “Law and Finance.” Journal of Political Economy 106 (Dec. 1998): 1113–55.
La Porta, Rafael, Lopez-de-Silanes, Florencio, Shleifer, Andrei, and Vishny, Robert W. “Legal Determinants of External Finance.” Journal ofFinance 52 (July 1997): 1131–50.
Macey, Jonathan, and Miller, Geoffrey. “Double Liability of Bank Shareholders: History and Implications.” Wake Forest Law Review 27, no. 1 (1992): 3162.
Mahoney, Paul. “The Political Economy of the Securities Act of 1933.” Journal of Legal Studies 30 (Jan. 2001): 131.
Marquis, Ralph, and Smith, Frank. “Double Liability for Bank Stock.” American Economic Review 27 (Sept. 1937): 490502.
Means, Gardiner. “The Diffusion of Stock Ownership in the United States.” Quarterly Journal of Economics 44 (Aug. 1930): 561600.
Michie, Ranald C. “The London and New York Stock Exchanges, 1850–1914.” Journal of Economic History 46 (March 1986): 171–87.
Navin, Thomas, and Sears, Marian. “The Rise of a Market for Industrial Securities, 1887–1902.” Business History Review 29 (June 1955): 105–38.
O’Sullivan, Mary. “The Deficiencies, Excesses and Control of Competition: The Development of the U.S. Stock Market from the 1930s to 2001.” In Balancing Public and Private Control: Germany and the U.S. in the Postwar Era, eds. Louis, Galambos and Fohlin, Caroline. New York, 2007, forthcoming.
O’Sullivan, Mary. “Funding New Industries: A Historical Perspective on the Financing Role ofthe U.S. Stock Market in the Twentieth Century.” In Financing Innovation, eds. Naomi, Lamoreaux and Sokoloff, Kenneth. Cambridge, Mass., 2006, pp. 1632–18.
Ott, Julia. “The ‘Free and Open’ ‘People’s Market’: Public Relations at the New York Stock Exchange, 1913–1929.” Business and Economic History On-Line 2 (2004): 143.
Rajan, Raghuram, and Zingales, Luigi. “The Great Reversals: The Politics of Financial Development in the 20th Century.” Journal ofFinancial Economics 69 (July 2003): 550.
Roe, Mark. “Political Preconditions to Separating Ownership from Corporate Control.” Stanford Law Review 53 (Dec. 2000): 539606.
Romano, Roberta. “Competition for Corporate Charters and the Lesson of Takeover Statutes.” Fordham Law Review 61 (March 1993): 843–64.
Sylla, Richard. “Schumpeter Redux: A Review of Raghuram G. Rajan and Luigi Zingales’s Saving Capitalism from the Capitalists.” Journal of Economic Literature 44 (June 2006): 391404.
Warshow, H.T. “The Distribution of Corporate Ownership in the United States.” Quarterly Journal of Economics 39 (Nov. 1924): 1538.
White, Eugene. “The Merger Movement in Banking, 1919–1933.” Journal of Economic History 45 (June 1985): 285–91.
Winter, Ralph. “State Law, Shareholder Protection, and the Theory ofthe Corporation.” Journal of Legal Studies 6 (June 1977): 251–92.
The Annalist. 1918–1929.
Asks Recognition of Curb Securities.” Wall Street Journal, 23 Aug. 1928, p. 9.
Bank & Quotation Record. 1930.
Bank Stocks as Investments.” Forum (July 1925): 6.
Bank Stock Firms Ask Clearing House.” New York Times, 10 Dec. 1929, p. 53.
America’s Favorite Investments.” Barron’s (14 Dec. 1925): 3.
Chicago’s Position as a Security Mart.” Banker’s Magazine (Oct. 1924): 840.
Curb’s New Head Outlines Policies.” New York Times, 19 Feb. 1928, p. 43.
Decline of Exchange Trading.” New York Times, 26 Feb. 1890, p. 4.
Financial Queries and Investment Suggestions.” Barron’s (30 Jan. 1928): 15.
Financial Review. 1916; 1921, 1880–1921.
Five Billions in Five Years.” Wall Street Journal, 24 Oct, 1906, p. 1.
Have New York Banks Turned the Corner?Barron’s (7 May 1934): 3.
Investment Demand Continues Strong.” Barron’s (7 Feb. 1927): 12.
Ownership of Banking Institutions: Concentration of Holdings of Bank Stock.” Banker’s Magazine (March 1907): 420.
#x201C;Speculation in Bank Stocks.” Bankers’ Magazine (Sept. 1910): 337.
Speculation in Bank Stocks.” Bankers’ Magazine (April 1928): 482.
Stock Dividend on Bank Stocks.” Barron’s (15 May 1922): 7.
Too Many Bank Stockholders!Bankers’ Magazine (Oct. 1930): 503.
Trading in Rail and Industrials.” Wall Street Journal, 1 Jan. 1929, p. 16.
Wall Street Talk.” New York Times, 16 June 1897, p. 8.
Hughes Commission. The Report of the Hughes Commission of 1909. Reprinted in Van Antwerp, WilliamThe Stock Exchange from Within. New York, 1914, pp. 415–46.
Manual of Statistics Company of New York. Manual of Statistics. New York, 1885–1915.
Moody’s. Manual of Industrials. New York, 1933.
National Association of Securities Commissioners. Report of the Committee on Stock Exchange Investigations of the National Association of Securities Commissioners on the New York Curb Market. New York, 1929.
Securities and Exchange Commission. Special Study of the Securities Markets. Washington, D. C., 1964.
BrownWilliam, J. William, J.Mulherin, Harold, and Weidenmier, Marc D.. “Competing with the NYSE.” National Bureau of Economic Research Working Paper no. 12343. June 2006.
Coffee, John. “The Rise of Dispersed Ownership: The Role of Law in the Separation of Ownership and Control.” Columbia Center for Law and Economic Studies, Working Paper no. 182. Jan. 2001.
Doyle, William M. “The Evolution of Financial Practices and Financial Structures among American Manufacturers, 1875–1905: Case studies of the Sugar Refining and Meat Packing Industries.” Ph.D. diss., University of Tennessee, 1991.
Merrill, Francis. “The Chicago Stock Exchange.” Ph.D. diss., University of Chicago, 1937.
Musacchio, Aldo. “Trading Places: Stock and Bond Market Turnover in Europe, the United States, and Latin America, 1880–1930.” Harvard Business School, mimeo. May 2007.
Roe, Mark. “Legal Origins and Modern Stock Markets.” Harvard Law School Working Paper. June 2006.
New York Stock Exchange Archives, New York.

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed