• The Financial Crisis of 1873 and 19th Century American Corporate Governance
    • ‘The crisis of 1873 was one of the most severe financial crises in the history of the US… In this paper we focus on a different aspect of the crisis of 1873 – the connection between the crisis and failures of corporate governance. We argue that tunneling and looting of firms by their executives and directors exacerbated the financial panic and led to an economic depression. The 1873 financial provides evidence that is consistent with the emerging markets crisis of 1997-1998 and exemplifies the importance of corporate governance and investor protection.’

  • Advances in Communication Technology and Growth of the American Over-the Counter Markets: 1876–1929
    • ‘The rapid development of the nationwide telephone network following the expiration of the Bell patents in 1894, along with expansion of private wire telegraph networks, created the “nerve center” necessary for rapid growth in the decentralized, dealer intermediated, over-the-counter security markets… Moreover, trading activity on the organized stock exchanges fell during this period, suggesting that these technologies provided a competitive advantage to the over-the-counter markets.’
    • You can find my article on the ancient history of FinTech here.

  • The Early Managed Fund Industry: Investment Trusts in 19th-Century Britain
    • ‘The neglected history of managed funds reveals prior episodes of sustained growth, questionable practices, upheaval and inevitably, regulation. The first fully diversified managed fund appeared in Britain in 1868, and the industry remained largely a British preserve until the rise of the investment company and the mutual fund in the United States during the 1920s. This paper documents the features of the early trusts, discusses the rise of the industry and the challenges it survived in the early years, and draws parallels with facets of the finance industry of today.’
    • I wrote an article touching upon this topic here.

  • Bubbles, Gullibility, and Other Challenges for Economics, Psychology, Sociology, and Information Sciences
    • Gullibility is the principal cause of bubbles. Investors and the general public get snared by a “beautiful illusion” and throw caution to the wind. Attempts to identify and control bubbles are complicated by the fact that the authorities who might naturally be expected to take action have often (especially in recent years) been among the most gullible, and were cheerleaders for the exuberant behavior. Hence what is needed is an objective measure of gullibility.’
  • What Causes New Securities Regulation? 300 Years of Evidence
    • ‘At each previous step in the process, speculators have been very quick to take advantage of whatever was at the cutting edge of information technology. In the early 18th century, agents of speculators would race back to England with news of foreign wars, to be the first to use that information to buy or sell government debt. In the winter of 1791-92, only a year or so after regular securities trading began in the United States, three express stagecoaches were running daily between New York and Philadelphia, and speculators were sending agents back and forth to arbitrage between prices in the two cities… There are few areas of life, if any, where knowledge translates so directly into money as it does in the stock market. Whenever technological change has made information cheaper or faster to receive, speculators have been eager purchasers. In this respect, computers are nothing new.’
  • Medieval Tax Scam (H/T Michael Mauboussin)
    • ‘A millennium-old tax scam has been revealed with the discovery of thousands of coins in a muddy field that together make up the largest hoard to be unearthed from the immediate post-Norman conquest period.The British Museum announced the discovery of the coins from a pivotal moment in English history on Wednesday. Some depict Harold II, the last crowned Anglo-Saxon king of England, and an almost equal amount show the man who replaced him after the Battle of Hastings in 1066, William the Conqueror, the first Norman king of England.’