Taxation, regulation and the information efficiency of the Berlin stock exchange, 1892-1913

In this article, we investigate the information efficiency of the Berlin stock exchange using returns of a new daily stock-market index for the years 1892-1913. We focus on the impact of the 1896 stock exchange law and of the increases of the stock-market turnover tax in 18 94 and 1900 on information efficiency. We fit an ARMA(O,I)-GARCH(I,I) model to the data and search for structural breaks. This approach yields no convincing evidence that the tax increases had a negative influence on weak information efficiency. In addition, the restriction of derivative trading by the 1896 stock exchange law did not result in measurable changes in the autocorrelation of daily returns.