The Relation between Stock Market Movements and NYSE Seat Prices


  • Donald B. Keim,

  • Ananth Madhavan

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    • Keim is from Wharton School, University of Pennsylvania and Madhavan is from Marshall School of Business, University of Southern California. We thank René Stulz (editor) for many helpful suggestions that greatly improved the paper. We are also grateful for comments on earlier incarnations of this paper from Yakov Amihud, Lawrence Harris, Nicholas Kiefer, Bruce Lehmann, Lubos Pastor, G. William Schwert, George Sofianos, Avi Wohl, and seminar participants at Berkeley, Cambridge University, New York University, Riverside, University of Southern California, the Econometric Society Meetings, the JFI Conference, and the University of California at Davis Conference “Ten Years After the Crash.” Yuval Bar-Or, Marshall Gordon, and Jason Yacoub provided expert research assistance. Keim thanks the Rodney White Center for financial assistance. Any errors are our own.


Exchange seat prices are widely reported and followed as measures of market sentiment. This paper analyzes the information content of NYSE seat prices using: (1) annual seat prices from 1869 to 1998, and (2) the complete record of trades, bids and offers for the seat market from 1973 to 1994. Seat market volumes have predictive power regarding future stock market returns, consistent with a model where seat market activity is a proxy for unobserved factors affecting expected returns. We find abnormally large price movements in seats prior to October 1987, consistent with the hypothesis that seat prices capture market sentiment.