Speculation in securities on the stock market of the Russian Empire in the early 20th century: a behavioral analysis

Galushko Il'ya Nikolaevich Postgraduate student; Department of Historical Informatics; Lomonosov Moscow State University 27 Lomonosovsky Prospekt, building 4, Moscow, 119234, Russia i.galushko15@gmail.com Other publications by this author

The study of the stock market as a historical phenomenon requires an appeal not only to the institutional and legal framework of its development, but also to speculative practices, which largely determined the dynamics of pricing and behavior of bidders. The stock quotes recorded in stock market bulletins represent a unique historical source: they reflect not only macroeconomic trends and the state of public finances, but also expectations, sentiments, and sometimes collective strategies of bidders. For the historian, they become a kind of "barometer" of trust in institutions, companies and the state.

The study of speculation acquires particular importance in the context of the history of capital concentration in the Russian Empire. The formation of large financial and industrial groups was closely linked to the mechanisms of the stock market, where speculative operations often turned out to be a tool for redistributing ownership and influence. Banking syndicates played an important role in this process, maintaining the stock and bond prices of the enterprises with which they were associated, thereby creating a specific form of corporate solidarity and covert coordination of interests.

No less significant is the activity of the state in the capital market. Maintaining quotations of government interest—bearing securities was considered as an element of financial stability, and debt transactions themselves as a tool to strengthen confidence in economic policy. Thus, the state became an active participant in the stock market game, whose actions had a direct impact on the investment attractiveness of the Russian market as a whole. The government was interested in maintaining the high prices of its funds, and any actions on the stock market somehow lead to professional speculation.

At the same time, speculation had an important functional significance.: it provided liquidity to the stock market, creating conditions for accelerating the free circulation of securities. It was the presence of speculators that allowed him to act as a mechanism for redistributing resources and information.

Thus, addressing the phenomenon of speculation opens up new perspectives in studying the history of the Russian stock market: it allows us to consider it not only as a platform for investment, but also as a complex system of interaction between the state, banks, industrial capital and private players, in which securities prices act not only as economic indicators, but also as a source for reconstruction. social and political practices.

Turning to the methodology of behavioral finance will help us significantly enrich the study of speculation in the historical stock market. This approach allows us to take into account not only the rational, but also the psychological factors that determined the behavior of investors. Thus, we tend to interpret price dynamics as a reflection of collective expectations, herd behavior, excessive optimism or panic.

A brief body of research on the phenomenon of speculation on the stock market of the Russian Empire consists primarily of the works of P. V. Lizunov, L. I. Borodkin and A.V. Konovalova. Borodkin and Konovalova's monograph "The Russian stock market at the beginning of the 20th century: exchange rate dynamics factors" ^[1] reconstructs the behavior of industrial stock prices on the St. Petersburg Stock Exchange, based on long series of quotations and statistical modeling tools; the authors raise the question of the relationship between investment and speculation, the peculiarities of the perception of positive and negative news by the stock market, assess the degree of information relations between Russian and foreign stock exchanges. These plots were described in more detail in the dissertation of A.V. Konovalova, devoted to the topic of the influence of economic and political factors on the exchange rates of 1900-1914.^[2] P. V. Lizunov, in a series of studies on the Russian stock exchange system and its actors, examines the role of commercial banks in fueling stock market hype (and, consequently, mass speculation in the market) through the issuance of loans. secured by securities ^{[3, 4]}; he also examines in detail government countermeasures against speculation on the exchange rate of the credit ruble in 1887-1894, analyzing the mechanisms of government intervention in price dynamics ^[5]. In later texts, Lizunov describes the transformation of the stock exchange during the First World War and the circulation of Russian interest-bearing securities on domestic and European markets ^[6], which complements the picture of interaction between the state, banking syndicates and professional stock market participants.

An extremely important source for our research was the work of A. Vasiliev "Stock speculation. Theory and Practice", published in 1912 ^[7]. There is no detailed information about this author in the relevant Russian historiography. This book is known as one of the few guides on investing and speculating in the stock market published in Russian at the beginning of the 20th century. In the article "Russian Society and the Stock Exchange in the second half of the 19th – early 20th century", P.V. Lizunov calls Vasiliev a stockbroker who "published a book with a rather eloquent title "Stock Speculation, theory and Practice", in which he shared his accumulated experience"^[4]. In 1913-1914 A. A. Vasiliev published the magazine "Stock Speculation and Joint-stock business".

Vasiliev begins the introduction of his book with the phrase that he intends to follow the works of the French specialist in finance theory A. Courtois in all its contents (in particular, referring to the "Treatise on Exchange Operations and Exchange Operations")^{[7, c. 5]}. As Vasiliev notes: "it makes no sense to list other names, i.e. to give the appearance of external erudition to what should be just knowledge, in a work like this one" ^{[7, p. 5]}. The book itself really acts as a consistent collection of practice-oriented advice on all key topics included in the subject of stock speculation. Vasiliev repeatedly emphasizes that a lot of things in the profession of a stock speculator are learned solely by experience ^{[7, p. 69]}, so the book is full of a large number of examples with a detailed analysis of typical market situations and widely used types of exchange transactions. It turned out to be especially important for us to clearly distinguish between the types of a long–term investor and a speculator; income from investing capital in interest-bearing securities and income from long-term speculation, which runs through the entire work of A. A. Vasiliev. The book "Stock speculation. Theory and practice" within the framework of our research has become a key source for reconstructing the ideas of stock market participants about the methods of assessing the investment attractiveness of securities.

Another source was the book "Political, Economic and Financial Issues of Recent Times" ^[8], which included analytical articles by I.P. Manus (1860-1918), a well-known stock speculator who earned a million-dollar fortune on the St. Petersburg Stock Exchange^[9]. In the period from 1902-1903, I.P. Manus periodically wrote to various St. Petersburg newspapers on topics related to the financial and economic policy of the Russian Empire. In his articles, he often criticizes the decisions of the Ministry of Finance^{[8, 28-31]}; denounces large speculators and "dealers" who carry out various frauds on the stock market^{[8, p. 7-9]}; a financial analyst offering solutions to specific problems^{[8, p. 101]} – in total in a book published in 1905 G., 69 articles were included. This source proved to be extremely useful for our research due to the wide range of topics covered within the framework of the exchange issues.

The group of archival sources includes materials from the fund No. 143 of the Central State Archive of Moscow (CGA of Moscow), which preserves the documentation of the Moscow Stock Exchange Committee for 1839-1918. The materials of the Moscow Stock Exchange Committee provide a researcher with an extremely valuable opportunity to consider the subject of stock trading through the prism of interaction between government agencies and the Institute of trade and industrial representation. For a detailed description of the process of regulating trading on the stock market, it is important for us to know how the object of our research is refracted in the interpretations of different social groups. For example, the materials of case No. 288 "Reports, articles and certificates on measures and conditions for attracting private capital to railway construction" (453L) ^[10] allow us to judge how representatives of the financial community interpreted the conditions for attracting private capital (in the comments of the commission of the Exchange Committee on the legislative proposals of the government), technical specialists senior management of railway companies (in the reports of leading engineers), officials of the Ministry of Finance (in inquiries and draft legislative acts). We have a wide panorama of views from a diverse professional community.

Typology of stock market bidders

We would like to begin the section devoted to the behavioral analysis of securities returns on the stock market of the Russian Empire by describing the groups of bidders that were identified by exchange professionals at that time. In the future, these groups will appear more than once in the texts of our sources. One of the main distinctions that appears both in historiography and in the materials of stock market theorists of the early 20th century should be immediately identified ^{[7, p. 33]} – this is the distinction between "investors" and "speculators". The authors of our sources separate the "public" from this group – a predominantly negative descriptive category of bidders who are destined to lose their money either through their own fault or by being victims of fraud and speculative techniques of professionals. But we will return to this group at the end of this section, while we focus on the issue of "investors". And although the term "investor" is not applicable to financial literature of the early 20th century, this category of bidders is definitely separated from both "speculators" and "the public". I.P. Manus calls them "capitalists" ^{[8, p. 144]}, A. A. Vasiliev in the work "Stock speculation. Theory and Practice" does not apply special terms to them, but separately stipulates that, in addition to speculators using short–term trading techniques and mainly transactions for a period with liquidation within a month, there is another group of successful bidders who place their capital in securities with long-term goals. A. A. Vasiliev describes the placement of capital as a separate complex operation that requires a clear understanding of your goals and your "risk appetite." Individuals seeking to preserve and increase family savings should choose the most stable values – rental securities, stocks and bonds with a state guarantee, and city loans. In this context, a big argument begins that defining the boundaries of acceptable risk is a key stock market skill – the above-mentioned securities related to the "father of the family's premises" ^{[7, p. 33]} will give minimal returns. People with a greater propensity for risk can choose stocks and bonds of commercial companies as their investments – their profitability, as a rule, will exceed the rate of "risk-free" assets. Confirmation of the prevalence of such a division between investors in terms of risk tolerance will be the report of mining engineer A.A. Volsky "On measures to attract private capital to railway construction in Russia", presented at the Council of Congresses of Representatives of Industry and Trade ^{[10, l. 23]}. Discussing the intricacies of the mechanism for attracting private capital to a commercial enterprise, the author of the note notes that it is important to make a clear distinction between the two types of capitalists: "Capitalists who seek to place their savings in funds do not take entrepreneurial risks, and, conversely, those who seek entrepreneurial risk do not place their capital in funds. These are two completely different categories of capitalists in their psychological structure" ^{[10, l. 24]}. This quote certainly adds another difficult dimension to the conversation about investing capital – the purchase of significant blocks of shares implied the possibility of active participation in the life of the company through voting at the shareholders' meeting.

I.P. Manus in the article "Does the stock exchange need trading in general, and Kharkiv in particular" describes in detail the needs of such an investor: access to information about the state of individual enterprises and the market as a whole; implementation of an exchange mechanism for the credit reputation of bidders; stock infrastructure that supports constant liquidity ^{[8, pp. 151-153]}. We find similar needs among speculators. Throughout the work of A. A. Vasiliev, a red thread runs through the statement that a speculator's distinctive feature is calculation – a firm understanding of his own actions on the stock exchange; a detailed assessment of risk in relation to potential benefits; consideration of economic and socio–political factors of exchange rate dynamics ^{[7, p. 33]}. But at the same time, a speculator is a separate and independent profession. If a "capitalist" who deposits his funds can afford to engage in "stock market affairs" as an outside activity, a speculator, according to Vasiliev, does not have such an opportunity. At least if he expects to earn a steady income. Not only do most speculative techniques involve short-term trading, conditioned by legally defined periods for the liquidation of term transactions^{[7, p. 33]}, the established set of established practices of European speculation required the speculator to be present at stock exchanges on a daily basis, since at any moment the market picture could change and for certain securities the speculator had to either exit the market, having covered its obligation, or take the opposite side and, for example, become a seller instead of a buyer ^{[7, p. 73]}. It should also be said here that if a capitalist investing his funds hoped for a stable dividend or bond coupon and solved the problem of finding such capital investment objects for which it was possible to confidently predict progressive development over the 5-10–year horizon, then the speculator had to position himself daily in the market as a "boost" or "downgrade" ^{[7, p. 73]}. This did not mean that the speculator, by definition, made transactions on a daily basis, but he had to be ready for such a decision all the time. And, of course, this positioning created the ground for attempts to "uneconomically" influence stock prices.

In the texts of our sources, we find another group of bidders – the "public". This category is extremely vague – both A. A. Vasiliev and I.P. Manus use this term to generalize characteristics of all those who suffered a failure on the stock exchange through their own fault. Moreover, the textbook "public" turns out (as opposed to the speculator) to be a victim of their emotions and their ignorance of stock market affairs. The "public" is a generalized image, which, of course, had a real basis – financial crises always leave behind crowds of ruined (or simply lost) people, who often turn out to be victims of bankers or unscrupulous brokers. In the stock exchange literature of the early 20th century, the "public" always acts as an anti-example of stock market behavior. Developing his basic idea of a speculator as a professional who is able to firmly assess risk and not give in to emotions at the moment of an unfavorable scenario, A.A. Vasiliev colorfully describes what behavior will be fundamentally wrong, leading to significant losses: "Anyone who picks up cards, buys a stock, bond, or paper in general is at risk; there is conscious risk, i.e., taking into account unfavorable chances, is not a risk, but, strictly speaking, a vague awareness of danger and reckless disregard for it, rather than the ability to assess and weigh it. Unfortunately, on the stock exchange, i.e., many people strive for stock speculation with nothing but a thirst for enrichment and ignorance; their money, which they have, will inevitably serve as a fund for another, relatively small, category of players who know how to calculate, who know not only the principles, but also the details of the technique of exchange operations." ^[7].

The types of bidders presented are not the only possible ones. Of course, representatives of commercial banks and banking firms played a significant role in the exchange processes; managers of joint-stock companies who put the reserve capital of enterprises into securities; and occasional debtors who pledge securities as collateral. It would also be wrong to perceive descriptions of stock market literature and journalism as comprehensive characteristics: it is quite possible to imagine a successful representative of the "public" who correctly guessed the moment for a large bet made on emotions. However, as historiography currently shows, the presented typification is generally universal for all countries with established stock market institutions that correspond to the level of European financial practice at the beginning of the 20th century. These are the main groups of bidders whose decisions determined the exchange rate dynamics of securities on a daily basis.

Search and characterization of the "benchmark" on the stock market of the Russian Empire

The key gradation of exchange-traded assets in modern financial theory is the ranking of securities according to the risks borne by the holder. As a rule, the higher the risk, the higher the percentage of expected return. A special role in this context is played by an asset for which the risk is minimal – it becomes a measure by which aggregate demand begins to dictate its profitability requirements to issuers. When deciding to purchase a paper, the buyer compares its expected return with this "benchmark" and makes a verdict for himself whether he is satisfied with how much the return on this asset exceeds the return on the "benchmark" with associated risks. As the author of one of our sources generally states, by the beginning of the 20th century, there was a strong belief that government loans were such an asset with minimal risk. When discussing the types of capital allocation, A. A. Vasiliev cites the stable French expression "father of the family's premises", which implies the creation of an investment portfolio in which financial planning focuses not on profitability, but on the safety of funds; confidence that credit obligations will be fulfilled. In this regard, it will be useful to recall that "commitment" itself has been a cornerstone legal concept of European financial history since the 17th century. By the beginning of the 20th century, the architecture of European financial systems had reached a state in which one of the main tasks of maintaining financial stability and long-term prosperity was to ensure obligations to pay off external government debt: this attitude is fully relevant for the financial system of the Russian Empire. In this context, it is not surprising that government funds are becoming the main asset for the "father of the family's premises". The interest paid on government rent obligations becomes a "benchmark" asset with minimal risk. At the same time, we must not forget that even such assets are subject to market fluctuations. A. A. Vasiliev writes that the more trusted a paper is, the higher its exchange rate, i.e. the smaller the difference between the nominal price and the actual issue price. If a new loan is difficult to place, i.e. the state's credit reserves are depleted, then, firstly, the more difficult its conditions will be, i.e. the higher the interest paid and the lower the issue rate will be ^{[7, pp. 151-153]}.

One of the texts by I.P. Manus notes that a professional in stock trading must constantly monitor the movements of government securities quotations (the difference from the price of al pari, more on this in the next section) in order to determine the current state of the money market ^{[8, p. 144]}. If government values fall, the entire market will fall. The return of interest in state values is the first sign of recovery after the crisis.

Another proof of the regularity of considering government securities as a benchmark for the business environment of the early 20th century is found in the text of A. Frolov's report to the Council of Congresses of Representatives of Industry and Trade on the topic: "On the issue of conditions for attracting capital to railway construction." Reflecting on the necessary conditions for attracting capital, A. Frolov formulates several basic provisions of his report, one of which reads as follows: "1) A railway company must promise capital a profit at least not lower than that which government funds bring without any risk to capital." ^{[10, p. 413]}

Another characteristic feature of the benchmark is the almost absolute liquidity of the asset. The set of "Applications for admission of securities to quotation" for 1905 contains the charter of the Saratov Mutual Credit Society attached to the application. The section devoted to reserve capital begins with the paragraph: "reserve capital can only be given a room that would allow for its unhindered sale" ^{[11, p. 114]}. That is, the reserve capital should be stored in the most liquid assets. Next, we find the following statement: "The reserve capital of the Company, designated to cover the losses that may arise from its operations <...> it is stored in state and Government-guaranteed interest-bearing securities" ^{[11, l. 115]}. Thus, public funds were clearly considered in financial practice as the most stable and liquid asset.

Now that we have characterized the benchmark adopted in financial practice at the beginning of the 20th century, from which the risk calculation for other stock values begins, we can move on to a general description of the values of securities returns in the perception of the interested public.

Methods for assessing the investment attractiveness of a security

In this section of our work, we will try to systematize methods for estimating the fair value of an asset, the search for deviations from which is one of the main tasks of a capitalist looking for a profitable location for his funds. Here it is necessary to identify one of the fundamental problems of the theory of finance, which is apparently relevant for the entire financial history up to the present day: market reality always deviates significantly from the most picky and well-founded calculations. A. A. Vasiliev himself, describing the details of the shelving stock operation, notes: "the difference in rates for shelving should be the same as the difference when buying a double premium, and the theoretical difference in premiums is the greater the lower the premium and the longer the term; as always, the law of supply and demand somewhat deviates the real difference from the theoretical one." ^{[7, p. 56]}. We find a similar passage when describing the subtleties of calculating the parameters of a bill exchange operation. This calculation is based not only on purely arithmetic operations, but also takes into account considerations of distance, time to issue an order, the ability to execute it; the current position of the money market, which is chosen as the place of operation, and "many other elements that cannot be digitally accounted for" ^{[7, p. 69]}. Vasiliev even warns the reader that bill exchange is the most complex operation in the financial markets, requiring vast experience and "professional flair" developed over the years ^{[7, p. 69]}. Such remarks suggest that, at least at the level of established practices, a professional financier at the beginning of the 20th century took into account factors beyond the purely theoretical calculation, as interpreted by the "efficient market hypothesis", and operated with concepts such as "psychological law", "elements of analysis that cannot be digitalized", "deviation the market reality differs from the theoretical one." All this actualizes the topic of "behavioral finance" as a methodological basis for research in the field of financial history.

A. A. Vasiliev considers the law of supply and demand and the law of forces to be the main driving forces in financial markets ^{[7, p. 14]}. If everything fits into the classical interpretation with the first one, then the "law of forces" needs to be clarified somewhat. By this law, A. A. Vasiliev understands the occupied market share. If we turn to another source, I.P. Manus, we will generally see the same analytical tradition. In the article "Strikes of coal miners in America and coal exports from Russia to Europe," Manus argues that Russian industry should take advantage of the strike of coal miners in America to reorient European demand for southern steel plants.: "If we are able to provide services to all consumers in need of coal in the aforementioned ports in time, and taking into account our inexpensive coal prices, the proximity of seaports to our south and the quality of our southern coal, we can be sure that this clientele would not leave us even after the cessation of strikes, for habit plays a role in trade matters" ^{[7, p. 14]}. The described process should gradually lead to an increase in the value of the relevant securities of mining enterprises.

To organize a further narrative, let's take these two lines of reasoning and consider them in more detail. Speaking about the law of supply and demand, A. A. Vasiliev considers the state of the money market, the ratio of supply and demand for capital, to be one of the most important indicators in the practice of working with interest–bearing securities. The author deduces a general rule, according to which the% brought in by securities is directly dependent on the overall level of profit and is primarily normalized by a discount percentage. So, if there is a high discount rate, capitalists will start using their money at a discount, that is, they will sell their securities. This will lead to a fall in the value exchange rate and, at the same time, to an increase in its profitability (due to a deviation from the face value price) – and at some point the difference from the price of al pari will become so attractive that capitalists will again be asked to invest capital in interest-bearing securities ^{[7, p. 28]}. It is easy to see how much this rule is consistent with modern concepts of accounting interest cycles – the mechanisms for managing money market liquidity were known in detail at the beginning of the 20th century. As practical advice, A. A. Vasiliev notes that interest–bearing securities with a rate much higher than the nominal one are a bad investment, since most likely this paper is "overbought" - in this case, we should expect a corrective depreciation in the near future during the "cooling" period of aggregate demand. In the same section, another analytical technique is given – an assessment of the consistency of the interest rate movement of debt securities with government funds: "Of course, there are many purely speculative values on the stock exchange, the movement of which not only does not follow the movement of the main government securities, but also stands in clear contradiction with them; however, such independence of their exchange rate may for an experienced person, it can serve as an incentive to part with such a paper at the first opportunity" ^{[7, p. 28]}. Concluding the section on the influence of money market trends on the dynamics of debt securities quotations, A. Vasiliev writes that anyone coming to the stock exchange should remember that the more solid the paper, the lower its profitability. In addition, we will cite the already cited article by I.P. Manus, "Industrial and Financial Review for 1902," the author of which consistently proves that in 1902 there was a tendency for a gradual revival of the financial life of the empire after the turn-of-the-century crisis: rising quotations (reducing the negative gap from the price of al pari) of government debt securities attract capitalists to search for riskier ones. and profitable premises – these include shares of retained enterprises and commercial bonds ^{[8, p. 143]}.

The second fundamental aspect that we deduce from the content of the writings of stock market practitioners is market share, the "law of force" ^{[7, p. 14]}. In general, it is not surprising that the volume of markets available to an enterprise largely determines the validity of investors' expectations regarding future financial flows. In A. A. Vasiliev's text, this basic idea is intertwined with general arguments about progress: economic life is closely linked to the introduction of scientific and technological achievements, and the success of an enterprise in updating its material base in accordance with the trends and discoveries of the era determines its ability to compete for sales markets ^{[7, p. 72]}. However, the author warns that this consideration is general; it outlines the contours of economic life, helping the capitalist navigate the diversity of existing enterprises.: "Of course, such a general consideration by no means prejudges the issue of special allocation of capital in the funds of a particular enterprise. But it is precisely as a general consideration that it is necessary, since it makes it possible to navigate among continuously emerging enterprises. As a general rule, a new industry attracts capital, the most vital interests are grouped around it, and capitalists and financiers devote the most intense attention to it" ^{[7, p. 73]}. It is no coincidence that the author focuses on the "generality" of this consideration. The popularity of any branch of industrial production inevitably leads to increased stock market hype, which deviates quotes from "effective" estimates of the ability of an enterprise to make a profit corresponding to the current market valuation of its securities ^{[7, p. 73]}. Financial practice at the beginning of the 20th century was fully aware that beautiful descriptions of future abundance should be supported by concrete results reflected in the company's reports. Let's briefly describe the key ideas related to the analysis of financial statements.

A. A. Vasiliev writes bluntly that knowledge of the state of the money market and the dynamics of quotations in recent months alone will not be enough to make a meaningful decision on the placement of capital ^{[7, p. 32]}. To these data, it is necessary to add knowledge of the company's balance sheet, its profits and losses; knowledge of the state of assets and liabilities over the longest possible number of years; it is necessary to follow the key decisions of the board members and analyze the reports of annual meetings and "only after this preliminary work decide to put their money into the company's securities" ^{[7, p. 32]}. The Moscow Stock Exchange Committee, considering petitions from joint-stock companies and partnerships for admission to quotation on the Moscow Stock Exchange of their securities, demanded to provide a detailed report of the enterprise for 4 years ^{[11, l. 80]}. To characterize the main positions of the report, let us refer to the charter of the "Association of Cognac and vodka factories and warehouses of Russian grape wines of Nikolai Leontievich Shustov and his sons", attached to one of the applications. It should be noted that by a reply letter from the Department of Trade and Industry of the Ministry of Finance, the application of the Shustov and Sons Partnership was accepted according to the results of the report of the Exchange Committee and the shares of the company were admitted to quotation ^{[11, l. 339]}:

§40. The report should contain the following main articles in detail: a) the state of the capital of the main one, with the indication in the liability separately of the capital contributed in cash and issued in shares for the property transferred to the Partnership, as well as reserve capital to repay the value of the property and pension, and the capital contained in interest-bearing securities should not be shown above the price at which these securities were purchased, if if the exchange price on the day of drawing up the balance sheet is lower than the purchase price, then the value of the securities is shown at the exchange rate held on the day of closing the accounts; b) the total income and expenses for the time for which the report is submitted, both for the purchase of materials, etc., and for the sale of products; c) the cost of salary employees in the Partnership and for other management expenses; d) the account of the Partnership's cash assets and stocks belonging to it; e) the account of the Partnership's debts to other persons and the latter to the Partnership itself; f) the account of income and losses, and g) the account of net profit and approximate distribution thereof. ^{[11, l. 298]}

Of course, a profitable enterprise had to consistently demonstrate the ability to generate profits. Thus, in the aforementioned report by A. A. Bublikov on the issues of attracting private capital to railway construction, a common joke was quoted in the financial environment: "there are no income-free roads in Russia; all of them are profitable ... have not yet been built" ^{[10, l. 147]}. This comment refers to a lengthy discussion about why, from the point of view of assessing the future cargo flow and the cost of building a railway track, many railway projects submitted for concession are terribly overestimated. The author links all this with his main thesis that the policy of government guarantees for capital violates the "natural" nature of a capitalist enterprise, which involves the realization of economic and entrepreneurial talent, taking into account the risks taken ^{[10, l. 147]}.

At the end of this section, we note that in the stock exchange literature of the early XX century, you can also find techniques for organizing an investment portfolio. A.A. Vasiliev writes that an experienced capitalist tends to put his savings into different assets, distributing risks and trying to maximize possible returns at the same time: "However, there is already an element of risk in such a choice, placing capital in them (– in securities of joint–stock companies - I.G.) is not a placement d e pere de famille in in the strict sense of this concept, but when capital is divided into different parts, one of which is used to purchase government funds, the other for funds representing all the elements of a reasonable guarantee (as follows in the text, this is not only a government guarantee, but also a "general" economic guarantee of the success of the enterprise, for example, due to its technical equipment, there is no reason to recommend the purchase of such securities" ^{[7, p. 32]}.

Thus, we have characterized the general analytical tools of the stock exchange practice of the early 20th century. Of course, each of these areas opens up a lot of scope for highly focused research. It was important for us to understand which areas of analysis combined with the ideas about the professional flair of participants in stock trading. After all, as A. A. Vasiliev pointed out ^{[7, p. 69]}, A. A. Frolov wrote in his report, characterizing any attempts to establish for certain the future profitability of the railway as a "game with uncertainty" ^{[10, l. 415]}, there is always an element of "general" risk assessment and prospects in stock exchange practice. Market professionals often appeal to their own ability to summarize data, and such generalization is not always based on a rigorous formalized analysis. The ability to successfully cope with market uncertainty is precisely the "professional" content of the work of a participant in exchange trading. The presence of clarifications in the texts of our sources, which introduce into the narrative of stock transactions an idea of uncertainty that cannot be overcome by formal analysis methods, introduces our subject of research into the field of behavioral finance.

Behavioral deviations from the "efficient market"

One of the main consequences of the academic turn of finance theory towards "behavioral economics" was the consideration of various psychological phenomena in the description of stock trading processes. Today, a rich literature has already been accumulated both on individual human behavior on the stock exchange and on the mass psychology of bidders. In addition, the "behavioral" section today includes all the elements of an "inefficient" market: insider trading, market manipulation, information asymmetry, press bribery, etc. Although it should be clarified that behavioral in this case includes taking into account all these factors by exchange professionals. Researchers of exchange practices continue to focus on issues of perception and analysis. We have already partially addressed similar issues in our study. So, in A. A. Vasiliev, we found the formulation of a psychological law reflecting the tendency of new people on the stock exchange to buy growing values ^{[7, p. 35]}; a speaker at the Council of Congresses of Representatives of Industry and Trade spoke in a similar vein, pointing out the existence of different psychological types of capitalists who differ in their appetite for risk ^{[10, p. 24]}.

Another interesting example is found in the discussion of the "Law on Bonds", the documentation of which is kept in the archival fund of the Moscow Stock Exchange Committee ^{[12, l. 25]}. This set of documents allows us to trace the specifics of financial practice at the beginning of the 20th century in relation to debt securities, as the fund contains not only the draft law from the Ministry of Finance, but also detailed comments from the commission of the exchange committee. We assume that analyzing such a discussion is a productive way to learn about the specifics of exchange practice, which highlights the dialogue between market professionals and representatives of the regulatory authority. Thus, the committee's commission warns that the draft law sets too short a three-month deadline for not holding a meeting of bondholders, after which you can apply to the district court. The commission's review indicates that this may cause premature alarm in the money market in relation to the company, which may cause the exchange value of the debt securities on the stock market to fall ^{[12, l. 10]}. Another important point for us concerns the requirement for board members to provide any information requested by authorized representatives from the meeting of bondholders. The Commission expresses doubts that the current wording will not entail the use of this information "for personal purposes" ^{[12, l. 25]}, which could potentially harm the company.

A considerable part of the content of I.P. Manus's book "Recent Political, Economic and Financial Issues" is devoted to the disclosure of various financial crimes, either directly exploiting the "credulity of the public" or carried out through various frauds involving board members. Of course, this work does not attempt to fully and categorically agree with Manus that such frauds involving these individuals were indeed carried out exactly as it describes. The author could pursue his own interests, because the articles in question were published in major periodicals. However, the very staging of the fraud plots is important to us, as it is generally consistent with information from our other sources, which allows us to assume the prevalence of the idea of using such schemes in the professional exchange environment.

The analysis of the Witte banking syndicate's activities, given by Manus in the article "The harm of grunderism, the method of influence and the issuance of a loan for the city of Pompeii" is extremely interesting ^{[8, pp. 40-43]}. This syndicate, consisting of 15 large banks, was created to maintain the exchange rates of the largest industrial companies of the Russian Empire during the stock market crash of 1899. The Syndicate of the Ministry of Finance failed to prevent the spread of the stock market crisis. I.P. Manus, criticizing the government's activities, wrote that in fact the State Bank provided the liquidity speculators needed for their frauds: "A "short game" is possible only when there is a buyer, and even such a reputable one as a state-owned bank, otherwise who will you "play" for a short when everyone is selling their interest-bearing securities, but no one is buying securities" ^{[8, p. 41]}. In addition, according to I.P. Manus, a significant problem was that the leadership positions in this syndicate were occupied by representatives of financial circles who themselves participated in the creation of a financial bubble in the domestic stock market: "Who is to blame that these 5 million rubles were given at the complete disposal of people who were not only involved in the main in the creation of our Russian grundership, but among those involved in the syndicate for the purchase of securities was also a person who, being a member of the syndicate established by the Ministry of Finance, supplied this syndicate with his own securities and a "short-term game" on a daily basis" ^{[8, p. 41]}.

We find another example of an artificial increase in profitability in a report by engineer Bublikov on the organization of a government guarantee for the bond and equity capital of railway companies. The author describes a pernicious practice in which the share capital of the established companies was correlated with the bond fund in the proportion of 1/20, 1/30 ^{[10, l. 149]}. In this situation, the main beneficiaries of the railway's early successes were the founding shareholders, who received an almost identical capital guarantee with the bondholders during the unprofitable period of the company's formation, while the profitability of the latter was fixed and slightly exceeded the interest rate of the government loan. In the materials of Birzhevye Vedomosti, we find confirmation that this issue was part of a broad public discussion about the prospects for the financial and economic development of the Russian Empire. A report by Deputy Nekrasov was placed in one of the columns of the State Duma, which begins with the statement that "for every ruble of share capital (Zheleznodorozhny – I.G.) the company spends 21 rubles of bond capital" ^{[13, p. 2]}. The speaker calls on the state to take care of the identified imbalances in the risk-profit ratio of shareholders and bondholders and find a way to optimize the provision of guarantees for capital.

There are several extremely informative documents in the set of applications for admission of securities to quotation. There we can find a petition from the well-known oil company A. I. Mantashev & Co. for permission to allow their shares to be listed on the Moscow Stock Exchange, accompanied by the charter and 4-year reports. An official letter from the company (July 1905) specifically states that the reason for the appeal was the active private circulation of the company's securities on the over-the-counter Moscow market, which makes the securities "an object of play", and since the company is reputable and well-known, it fears excessive volatility of its securities ^{[14, l. 18]}. In the same collection, we found a letter to the Ministry of Finance from the stock exchange committee with the seal "SECRET" stating that "since the said Company is well-known and its company appears to be reputable, there could be no circumstances preventing the admission of the Company's shares to quotation; however, the Stock Exchange Committee cannot not to pay attention to the fact that the aforementioned request of the Board, according to the Gof Broker, may probably proceed from the fact that recently oil industry securities on the St. Petersburg Stock Exchange have been rising significantly in price and therefore the acquisition of quotation rights in Moscow may be aimed at increasing the publicity of the said paper, involving local speculators in a new game" ^{[14, l. 67]}. In this letter, we find an unequivocal confirmation of the consideration of speculation as a factor of stock market life at the highest level of the organization of stock trading.

The groups of downshifters and upshifters are mentioned more than once in the text of this paragraph. Although our main interest is the long-term placement of capital, we take into account that targeted speculation could have a significant impact on the dynamics of stock prices. It is important to clarify here that in the case of interest-bearing securities such as government or municipal bonds, the constant fluctuation of the exchange rate relative to the nominal value of the security requires taking into account the context of urgent transactions. It is noteworthy that in the section "Speculation and various types of exchange transactions" of A. A. Vasiliev's book, almost all the numerous variations of combinations of short-term purchase and sale of securities are analyzed using the example of state 4% annuity ^{[7, p. 49]}. As the author notes, the very nature of transactions for a period in which a person undertakes to pay the exchange rate difference between the price of a paper today and the price of the same paper in the laziness of the liquidation of the transaction (according to the law of November 10, 1907, the St. Petersburg Stock Exchange established two deadlines for the liquidation of fixed–term transactions - by the middle of the month and by the end) – puts him in the position of an interested party. As soon as the deal was finalized, until the day of liquidation, the speculator becomes either a "boost" or a "downgrade" – and not only is it not that he is tempted to use over-the-counter levers to influence the exchange rate; already at the level of market vision, he had clear preferences regarding exchange rate dynamics.

In the text of A. A. Vasiliev, we find another interesting behavioral remark, which the author elevates to the rank of a well-known pattern of financial markets: the fall in stock prices, as a rule, is faster and lasts for a shorter period than the upward movement ^{[7, p. 73]}. This pattern has also been described in detail in modern academic and applied literature on investment portfolio management theory. A. A. Vasiliev provides the following explanation: "There is always a company of people on the stock exchange who are interested in increasing, just as there is a company that directs its activities to decrease. Such companies consist of large banks that have entered into an agreement, and capitalists who lead the market. It should be noted that the upward tactics almost always develop slowly, while the downward ones, on the contrary, develop quickly. This reverse nature of upward and downward movements is explained in the very essence of the matter: all solid values tend to increase, since the more an enterprise has justified the hopes placed on it, the more natural the growth of its funds. But the justification of hopes requires time and real evidence, sometimes either unclear or deliberately obscured. On the contrary, completely accidental circumstances are enough to cause a rapid decline in the value of a very reputable enterprise: a water break in a mine, a disaster in an underground railroad, a large fire, a major strike – these are the moments that speculation uses to instantly reduce, i.e. justify the deals it has concluded" ^{[7, p. 73]}.

The presented excerpt will be a good conclusion for our article. A. A. Vasiliev demonstrates how the financial practice of the period under review combines a rational assessment of the financial results and prospects of an enterprise, taking into account "inefficient", speculative factors of pressure on prices from interested groups.

The article is published in the version approved by the reviewers (after receiving a positive review recommending the manuscript for publication) with corrections made by the author (after receiving the editor’s comments, if any).
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