Cross-Section of a ‘Bubble’: Stock Prices and Dividends during the British Railway Mania
AbstractHistorical ‘bubbles’ are often attributed to mispricing, but the empirical analysis of such episodes has been limited. This paper examines a notable but academically neglected period, known as the British Railway Mania, using a new dataset and a cross-sectional methodology which is unique to the study of historical asset price reversals. The main finding is that the cross-sectional variation in stock prices, in every week of the sample, is explained by the cross-sectional variation in dividends, growth and risk, with no significant differences between the railways and non-railways. This implies that an economic bubble was not responsible for the rise and fall in the prices of railway assets at this time.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 21821.
Date of creation: 31 Mar 2010
Date of revision:
bubbles; financial crises; Railway Mania;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
- G01 - Financial Economics - - General - - - Financial Crises
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