Stock Exchange in the Pre-War Period"

This chapter comprises two parts. The first part provides detailed evidence on the history of development of the Tokyo Stock Exchange (hereafter, TSE), and the second part develops a theoretical and empirical analysis to explain the development of the TSE. A look at a number of figures con-structed by the authors shows that the TSE took off around 1918. The au-thors stress that no significant institutional change happened around 1918 and try to explain the take off of the TSE by relying on the notion of ex-pectation equilibria, the idea of which depends heavily on the search theo-retic approach that began with the pioneering work by Peter Diamond (1982). I have three comments. The first is on the theoretical explanation. The authors try to explain the take off of the TSE by relying on a model of mul-tiple equilibria that are generated by the bilateral causations between mar-ket liquidity and the number of initial public offerings (IPOs). The “low” equilibrium is identified as the one with low liquidity and the “high ” equi