Proposal preview

Financial Markets in troubled times

Angelo Riva (Private professor at the European Business School-Paris and affiliated researcher at Paris School of Economics; corresponding session organizer)
Caroline Fohlin (professor at the Emory University)
Raphaël Hekimian (PhD student at the Paris Ouest Nanterre University)

A stream of literature has underscored that stock markets are important engines of growth in several countries, from both an historical (Neal, 1990; Michie, 2001; Rousseau, 2002; Rousseau and Sylla, 2003) and comparative points of view (from the seminal paper of Levine and Zervos, 1996, evidences on the link between stock market and growth are a major contribution of the “finance and growth” literature; see Levine, 2005 for a review). Moreover, another important strand of theoretical and empirical literature points to the role of the organization of both individual markets and stock exchange industry as a whole in the performances of the financial market, again both historically (Davis and Neal, 1998; Fohlin, 2016; Gehrig and Fohlin, 2006; Hautcoeur and Riva, 2012; White, 2013) and today (see Biais, Glosten and Spatt, 2005 for a review).
First, the organization can contribute to market liquidity: potential buyers of newly issued debts and equity are more willing to buy and at lower risk premium if they can resell their securities quickly and cheaply ; well-functioning secondary markets then lower the cost of capital for issuers and contribute to the effectiveness of primary markets which, in turn, support investment and growth; moreover, active secondary markets allow holders to post securities as collateral and then obtaining with further funding for their projects; finally, liquidity can reduce market impact of (fire) sales and help in stabilizing price; yet, “over-trading” ( Kindleberger, 1978) might harm stability. Second, price discovery systems play a central role in aggregating information into prices, guiding then the investment, smoothing volatility and improving market efficiency. Third, effective organizations might limit counterparty risk and further mitigate the potential for contagion to other markets.
It is nevertheless difficult to conceive of a microstructure simultaneously accomplishing all those goals; trade-offs must be made among different dimensions of market effectiveness. For example, enlarging the number of market operators can improve trading volumes, but harm counterparty risk management; stringent listing requirements can contain volatility but limit the financing of innovative firms. Furthermore, competition among exchanges may reduce market power but may fragment information and limit price discovery. Thus, the organization of the stock exchange industry as a whole is often relevant in the analysis of the role of financial markets.
While often scholars focus on “normal” periods, in this session, organizers welcome papers dealing with stock exchange (industry) organizations in “troubled times” of extreme swings in prices. Goetzmann (2015) analyzes a large data sample of stock market indices and finds that, if booms in themselves are relatively rare events, crashes are even rarer. Yet the consequences of such crashes might be severe and lasting. What is the role of stock market (industry) organizations in boom, bubble and bursts? How do exchange organizations help in smoothing prices changes? How do organizations support increases in prices while forestalling bubbles and subsequent crashes? What is the role of price discovery systems, trading mechanisms, counterparty risk management, and settlement and delivery process? What is their role in supplying and constraining (over)liquidity? Conversely, what is the role of organizations in the formation of bubbles that turn into crashes and panics? In transforming a crash into a long depression of market prices? How do organizations contribute to or delay the recovery of both prices and the financing of the economy? Moreover, what is the role of organizations in either mitigating or enhancing the transmissions of shocks and the contagion of crisis?

Papers will address these questions drawing from historical experiences from every time and country.
Young scholars (PhD students, post-doctoral fellows and young assistant professors) are particularly invited to submit their original works.

Biais, B., Glosten, L., & Spatt, C. (2005). Market microstructure: A survey of microfoundations, empirical results, and policy implications. Journal of Financial Markets, 8(2), 217-264.
Davis, L., & Neal, L. (1998). Micro rules and macro outcomes: the impact of micro structure on the efficiency of security exchanges, London, New York, and Paris, 1800-1914. The American Economic Review, 88(2), 40-45.
Fohlin, C. (2016). Frictions: Some Lessons from History, in Chambers, D. and E. Dimson (Eds.) Lessons from Financial History, London: CFA Institute.
Gehrig, T., & Fohlin, C. (2006). Trading costs in early securities markets: the case of the Berlin Stock Exchange 1880–1910. Review of Finance, 10(4), 587-612.
Goetzmann, W. N. (2015). Bubble Investing: Learning from History (No. w21693). National Bureau of Economic Research.
Hautcoeur, P. C., & Riva, A. (2012). The Paris financial market in the nineteenth century: complementarities and competition in microstructures. The Economic History Review, 65(4), 1326-1353.
Levine, R., & Zervos, S. (1996). Stock market development and long-run growth. The World Bank Economic Review, 10(2), 323-339.
Kindleberger, C. P. (1978). Manias, panics and crashes: a history of financial crises. Springer.
Michie, R. (2001). The London stock exchange: A history. OUP Catalogue.
Neal, L. (1993). The rise of financial capitalism: International capital markets in the age of reason. Cambridge University Press.
Rousseau, P. L. (2002). Historical perspectives on financial development and economic growth (No. w9333). National Bureau of Economic Research.
Rousseau, P. L., & Sylla, R. (2003). Financial systems, economic growth, and globalization. In Globalization in historical perspective (pp. 373-416). University of Chicago Press.
White, E. N. (2013). Competition among the exchanges before the SEC: was the NYSE a natural hegemon?. Financial History Review, 20(01), 29-48.

Please submit proposals (max 2 pages) and curriculum vitae to Deadline for submission is 29 January 2018.


  • Angelo Riva, European Business School Paris & Paris School of Economics,,
  • Caroline Fohlin, Emory University,,
  • Raphaël Hekimian , Paris School of Economics,,

Session members

  • Jeremy Ducros, Geneva University and Paris School of Economics,
  • Stefano Ungaro, Paris school of economics ,
  • John Turner, Queen's University Belfast,
  • William Quinn, Queen's University Belfast,
  • Christopher Coyle, Queen's University Belfast,
  • Jan Annaert, University of Antwerp,
  • Stephanie Collet, Goethe University Frankfurt,
  • Grandi Elisa, Paris School of Economics,

Proposed discussant(s)

  • Caroline Fohlin, Emory University,
  • Raphaël Hekimian , Paris Ouest Nanterre University,
  • Angelo Riva, European Business School Paris & Paris School of Economics,
  • William Quinn, Queen's University Belfast,
  • Christopher Coyle, Queen's University Belfast,

This panel has Call for Papers open.
If you are interested in participating, please contact the panel organizer(s) to submit a proposal.

  • Angelo Riva, European Business School Paris & Paris School of Economics,,
  • Caroline Fohlin, Emory University,,
  • Raphaël Hekimian , Paris School of Economics,,