Does Financial Regulation Matter? Market Volatility and the US 1933/34 Acts

摘要

The impact of the US 1933/34 Acts, the rst national nancial regulation acts in the world, on nancial markets have been under debates since Stigler (1964). Major ndings in the literature is that nancial regulation enacted by these laws is at best being ineffective to improve nancial markets until some recent studies imply indirectly that they could be effective. By studying daily returns of NYSE data from 1890 to 1970, this paper provides systematic evidence that the 1933/34 Acts have substantially reduced market volatilities after controlling for Great Depression effect and macroeco- nomic variables. Moreover, we show that even when we treat the existence and the date of the volatility changes as unknown, statistically identied structural changes are fully consistent with the above results that the volatility reduction time coincide with the enacting of the Acts.