A postcard from the past: The behavior of U.S. stock markets during 1871-1938

In this article, we study the behavior of the stock prices of a subset of eight U.S. industries from the late 1800's to the Great Depression. In particular, we focus on the potential presence of volatility shifts, the persistence of volatility, and on the degree of co-movement of stock returns prior to and during the Great Depression. Our findings show that stock markets became particularly volatile toward the mid 1930's, but that the persistence of volatility tended to decrease around the same time period. In that regard, we find little evidence that such behavior is driven by trading volume. In addition, we conclude that the overall correlation across the different industries was relatively more significant in statistical terms from 1921 to part of the Great Depression (1929-1931; 1933-1934 and 1936).