New evidence on the first financial bubble
AbstractThe Mississippi Bubble, South Sea Bubble and the Dutch Windhandel of 1720 together represent the world's first global financial bubble. We hand-collect cross-sectional price data and investor account data from 1720 to test theories about market bubbles. Our tests suggest that innovation was a key driver of bubble expectations. We present evidence against the currently prevailing debt-for-equity conversion hypothesis and relate stock returns to innovations in Atlantic trade and insurance. We find evidence consistent with the innovation-driven bubble dynamics documented by Pastor and Veronesi (2009) for new economy stocks. Our evidence seems inconsistent with clientele-based theories that emphasize bubble-riding and short-sales restrictions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Financial Economics.
Volume (Year): 108 (2013)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505576
Bubbles; Innovation; Clientele theory; Bubble riding; South Sea Bubble;
Other versions of this item:
- Rik P. & William Goetzmann & K. Rouwenhorst, 2009. "New Evidence on the First Financial Bubble," Yale School of Management Working Papers amz2542, Yale School of Management, revised 01 Nov 2009.
- Rik G.P. Frehen & William N. Goetzmann & K. Geert Rouwenhorst, 2009. "New Evidence on the First Financial Bubble," NBER Working Papers 15332, National Bureau of Economic Research, Inc.
- G01 - Financial Economics - - General - - - Financial Crises
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
- N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Markus K Brunnermeier, 2002.
"Bubbles and Crashes,"
FMG Discussion Papers
dp401, Financial Markets Group.
- G. William Schwert, 1990.
"Stock Volatility and the Crash of '87,"
NBER Working Papers
2954, National Bureau of Economic Research, Inc.
- Temin, Peter & Voth, Hans-Joachim, 2004.
"Riding the South Sea Bubble,"
CEPR Discussion Papers
4221, C.E.P.R. Discussion Papers.
- Peter Temin & Hans-Joachim Voth, 2004. "Riding the South See Bubble," Working Papers 213, Barcelona Graduate School of Economics.
- Peter Temin & Hans-Joachim Voth, 2003. "Riding the South Sea Bubble," Working Papers 91, Barcelona Graduate School of Economics.
- Peter Temin & Joachim Voth, 2004. "Riding the South Sea bubble," Economics Working Papers 861, Department of Economics and Business, Universitat Pompeu Fabra.
- Pástor, Luboš & Veronesi, Pietro, 2004.
"Was There A Nasdaq Bubble in the Late 1990s?,"
CEPR Discussion Papers
4485, C.E.P.R. Discussion Papers.
- Markus K. Brunnermeier & Stefan Nagel, 2004. "Hedge Funds and the Technology Bubble," Journal of Finance, American Finance Association, vol. 59(5), pages 2013-2040, October.
- Bart Hobijn & Boyan Jovanovic, 2000.
"The Information Technology Revolution and the Stock Market: Evidence,"
NBER Working Papers
7684, National Bureau of Economic Research, Inc.
- Bart Hobijn & Boyan Jovanovic, 2001. "The Information-Technology Revolution and the Stock Market: Evidence," American Economic Review, American Economic Association, vol. 91(5), pages 1203-1220, December.
- Christine Macleod, 1986. "The 1690s Patents Boom: Invention or Stock-Jobbing?," Economic History Review, Economic History Society, vol. 39(4), pages 549-571, November.
- Thorpe, David P. & Holland, Burt, 2000. "Some multiple comparison procedures for variances from non-normal populations," Computational Statistics & Data Analysis, Elsevier, vol. 35(2), pages 171-199, December.
- Harris, Ron, 1994. "The Bubble Act: Its Passage and Its Effects on Business Organization," The Journal of Economic History, Cambridge University Press, vol. 54(03), pages 610-627, September.
- John M. Griffin & Jeffrey H. Harris & Tao Shu & Selim Topaloglu, 2011. "Who Drove and Burst the Tech Bubble?," Journal of Finance, American Finance Association, vol. 66(4), pages 1251-1290, 08.
- Luboš Pástor & Pietro Veronesi, 2009.
"Technological Revolutions and Stock Prices,"
American Economic Review,
American Economic Association, vol. 99(4), pages 1451-83, September.
- Tom Nicholas, 2008. "Does Innovation Cause Stock Market Runups? Evidence from the Great Crash," American Economic Review, American Economic Association, vol. 98(4), pages 1370-96, September.
- Ann Carlos & Karen Maguire & Larry Neal, 2006. "Financial acumen, women speculators, and the Royal African company during the South Sea bubble," Accounting History Review, Taylor & Francis Journals, vol. 16(2), pages 219-243.
- Gary S. Shea, 2005. "Financial Market Analysis Can Go Mad (in the search for irrational behaviour during the South Sea Bubble)," CDMA Working Paper Series 200508, Centre for Dynamic Macroeconomic Analysis.
- Gary S. Shea, 2007. "Financial market analysis can go mad (in the search for irrational behaviour during the South Sea Bubble) -super-1," Economic History Review, Economic History Society, vol. 60(4), pages 742-765, November.
- Eli Ofek & Matthew Richardson, 2003. "DotCom Mania: The Rise and Fall of Internet Stock Prices," Journal of Finance, American Finance Association, vol. 58(3), pages 1113-1138, 06.
- Carlos, Ann M. & Moyen, Nathalie & Hill, Jonathan, 2002. "Royal African Company Share Prices during the South Sea Bubble," Explorations in Economic History, Elsevier, vol. 39(1), pages 61-87, January.
- Kingston, Christopher, 2007. "Marine Insurance in Britain and America, 1720 1844: A Comparative Institutional Analysis," The Journal of Economic History, Cambridge University Press, vol. 67(02), pages 379-409, June.
- Neal,Larry, 1994. "The Rise of Financial Capitalism," Cambridge Books, Cambridge University Press, number 9780521457385, April.
- Madarász, Aladár, 2011.
"Buborékok és legendák. Válságok és válságmagyarázatok - II/2. rész. A Déltengeri Társaság
[Bubbles and myths, crises and explanations II/2: the South Sea bubble]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1001-1028.
- Peter Koudijs, 2013. "The boats that did not sail: Asset Price Volatility and Market Efficiency in a Natural Experiment," NBER Working Papers 18831, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.