TY  - JOUR
AU  - Davis,Lance E.
AU  - Neal,Larry
AU  - White,Eugene N.
TI  - The Highest Price Ever: The Great NYSE Seat Sale of 1928-1929 and Capacity Constraints
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11556
PY  - 2005
Y2  - August 2005
DO  - 10.3386/w11556
UR  - http://www.nber.org/papers/w11556
L1  - http://www.nber.org/papers/w11556.pdf
N1  - Author contact info:
Lance E. Davis
Humanities and Social Sciences
California Institute of Technology
1200 East California Boulevard MC 228-77
Pasadena, CA  91125
Tel: 626/395-4092
Fax: 626/793-8580
E-Mail: led@hss.caltech.edu

Larry D. Neal
3070 Lane Woods Court
Columbus, OH 43221
E-Mail: lneal@illinois.edu

Eugene N. White
Department of Economics
Rutgers University
75 Hamilton Street
New Brunswick, NJ 08901-1248
Tel: 732-932-7363
Fax: 732/932-7416
E-Mail: white@economics.rutgers.edu
AB  - A surge in orders during the stock market boom of the late 1920s collided against the constraint created by the fixed number of brokers on the New York Stock Exchange. Estimates of the determinants of individual stock bid-ask spreads from panel data reveal that spreads jumped when volume spiked, confirming contemporary observers complaints that there were insufficient counterparties. When the position of the NYSE as the dominant exchange became threatened, the management of the exchange proposed a 25 percent increase in the number of seats in February 1929 by issuing a quarter-seat dividend to all members. While such a "stock split" would be expected to leave the aggregate value of the NYSE unchanged, an event study reveals that its value rose in anticipation of increased efficiency. These expectations were justified as bid-ask spreads became less sensitive to peak volume days after the increase in seats.
ER  -