Traditional financing and distant trades during modernization process of financial industry: a case of Yamaguchi prefecture in the 1870s

This paper examines the efficiency of the Dojima Rice Market established in 1730 in Osaka, and closed in 1869 due to the collapse of Tokugawa Shogunate. It had already been shown that there existed the price mechanism in Dojima. However, the most significant question: Whether the world first commodity futures market was efficient or not, remains to be unanswered. Before applying the empirical analyses, this paper first introduces the daily price index constructed from the original historical document, "Yorozu Souba Nikki (Daily memorandum of commodity price indices)," written by the contemporary rice merchant who dealt in the rice. From this memorandum, we can construct the daily price index both in the futures and the spot market during the period from 1798 to 1856. Based on this price index, the test of unbiasedness hypothesis and the classic measure of market efficiency; "weak-form efficiency" were applied to Dojima Rice Market, and it is shown that there existed these types of efficiency.