Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/111203 
Year of Publication: 
2014
Series/Report no.: 
Working Paper No. 148
Publisher: 
University of Zurich, Department of Economics, Zurich
Abstract: 
What determines risk-bearing capacity and the amount of leverage in financial markets? Using unique archival data on collateralized lending, we show that personal experience can affect individual risk-taking and aggregate leverage. When an investor syndicate speculating in Amsterdam in 1772 went bankrupt, many lenders were exposed. In the end, none of them actually lost money. Nonetheless, only those at risk of losing money changed their behavior markedly - they lent with much higher haircuts. The rest continued as before. The differential change is remarkable since the distress was public knowledge. Overall leverage in the Amsterdam stock market declined as a result.
Subjects: 
Leverage
collateralized lending
haircuts
personal experience
JEL: 
G12
G23
N23
G01
G02
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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