So, in the United States, the first stock exchange was the New York Stock Exchange, NYSE, which was created in 1792, not the first stock exchange in the world. The first stock exchange may have been in Antwerp or, I would say, Amsterdam, but New York Stock Exchange was the beginning in the United States, and there's a tendency for people to revere the first mover, so New York Stock Exchange has some sort of prestige. That's the first market, traditionally. In 1971, the Nasdaq market was created. It was a computerized market. Believe it or not, in 1971, it was at least partly – we had computers back then. But they created a market, so National Association of Securities Dealers Automated Quotation System, replacing the pink sheets. So here's what used to be, the New York Stock Exchange was the prestige place. Now I should have added, they have, exchanges have listing requirements so that the firms that are traded on the New York Stock Exchange have to have been around for a certain amount of time, they've had to have some earnings, they can't be fly-by-night organization. The New York Stock Exchange didn't investigate their complete investment potential but basics which would require listing. Then, but lots of firms didn't get on the New York Stock Exchange, so the National Association of Securities Dealers was an organization of dealers in these typically small stocks that were not so reputable. They were the disreputable stock market, and they had what they called pink sheets. This is before the Internet. The pink sheets were on pink paper, I guess, and they would mail them to you and would list bid and ask quotes on unlisted corporations. The third market is Nasdaq small cap. Even Nasdaq made distinction. So these were the low market capitalization stocks, the really, the guy-next-door types. And then the fourth market, large institutions sometimes trade amongst themselves stocks or other assets without the use of any exchange. You don't have to go through an exchange. Exchanges provide standards and codes of ethics. So, there's a certain amount of prestige associated with the New York Stock Exchange, but it's fading. As I said before, Nasdaq has often been where all the action is. It's those adventuresome corporations that don't look obviously good to the people who give listings on the New York Stock Exchange. So there's also something called the National Best Bid Best Offer Intermarket Trading System which was created by an act of Congress. Their regional exchanges and stocks can get delisted if they do something wrong that no longer warrants the confidence of the exchange. And stock exchanges didn't flourish until the late 19th century or sometime in the 19th century when information technology. We were entering the Information Age by the mid 19th century with the invention of cheap paper, the paper machine, pulp paper, typewriters, carbon paper, filing cabinets, all these things were information technology that made more things possible. Now there used to be other exchanges besides exchanges to buy and sell shares. They used to have lending exchanges. So, it used to be from 1926 to 1933, the stock exchange floor at the New York Stock Exchange, where the trading took place, and again it was all done in person back then, people talking to each other and trading. There was a buy-sell crowd in one part of the floor and there was a loan crowd on the other part of the floor where you would borrow stocks. This would be for short selling: you would borrow stocks and you would pay a loan rate on shares that you borrowed. But after 1929, the public turned against the lending market because they thought that they brought on the stock market crash of 1929, that short sellers were somehow responsible. You can choose which stock exchange to list on. Does it matter? Ning Zhu, who was a student here at Yale School of Management and is now at the Shanghai Advanced Institute for Finance, finds that, they did a study and they find that Chinese investors tend to trade in stocks that are locally listed and that stocks that share a lister, a share or stock exchange, tend to move together. People tend to invest in local stocks not because they have an information advantage. You might imagine that people who live in Connecticut, let's say, know what's going on in Connecticut and can predict. That might be true for bankers who are serious about it, but it's not true for ordinary investors. It's a familiarity bias. So, if you live in Shanghai, you want to buy stocks from a company headquartered in Shanghai just because you hear about them and you see them and you meet people. It's like family, I guess, you feel better about it. That's not just in China.
