St Petersburg Exchange: On the Road to Maturity. Industrial Stock Index, 1897–1914

Political violence and financial markets in Tsarist Russia

“…By the beginning of World War I, according to Ministry of Finance Yearbooks and data from the Yale International Center for Finance, approximately 613 separate stocks had traded at some point on the SPSE since the middle of the nineteenth century, nearly half of all joint-stock companies established from 1893 to 1901 (Borodkin and Perelman (2011) show that 1,460 joint stock firms were established over this time period). While some state-affiliated concerns were traded on the SPSE (mainly banks, railways and transport firms), the overwhelming number of firms which had placements on the SPSE were trade and industrial businesses (comprising 315 firms or 51 percent of the total – see Table 1).…”

“…Finally, in terms of information, as well, Russian markets had access to up-to-date financial news via the major international wire services, while a nascent but growing financial press in the country accompanied the expansion of the stock market (in stark contrast to the prevalence of censorship from the Tsar's officials for other publications). As Borodkin and Perelman (2011, p. 103) stated, financial information was even ‘included in the official statistical compilation published by the Ministry of Finance, the Ezhegodnik (Yearbook), starting in 1865’. In fact, recognizing the value of financial information, Tsarist authorities attempted to manipulate the French press from 1904 to 1906 to assure investors that Russian bonds were still worth buying (Long 1972).…”

“…On the other hand, what if other economic policies under the Tsar were driving stock returns rather than wars of conquest? In particular, Russia was on the classical gold standard from 1897 to 1914 (Drummond 1976), and this coincided with a period of both rapid industrialization and growth in the stock market, driving foreign investors into the equity exchanges (Gregory 1979) and ‘reinforc[ing] Russia's image as a reliable investment destination’ (Borodkin and Perelman 2011, p. 98); therefore, it is plausible that the gold standard was a driving factor in stock market returns and not political violence. Table 8 shows a series of the empire regressions including a dummy for each month that Russia was under the gold standard, and, apart from the successful assassinations model, the gold standard dummy is insignificant as an explanator of returns.…”