Financial Market Analysis Can Go Mad (in the search for irrational behaviour during the South Sea Bubble)
AbstractAn investigation into the legal and political history of South Sea Company subscription finance shows that the subscription contracts had default options built into them, as was typically the case in eighteenth-century subscription financing. Company records and contemporary pamphlet literature show that people understood the subscription finance mechanics that were stated in law. A fair presentation of South Sea share value data also supports this view. We thus conclude that the analyses published in this Review by Dale, Johnson and Tang were irretrievably flawed and present a substantially incorrect history of the markets for South Sea shares.
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Bibliographic InfoPaper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 200508.
Date of creation: 15 Jul 2005
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South Sea Company; Royal African Company; Financial Revolution; Bubble Act; subscription shares; options markets.;
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-08-13 (All new papers)
- NEP-FIN-2005-08-13 (Finance)
- NEP-FMK-2005-08-13 (Financial Markets)
- NEP-HIS-2005-08-13 (Business, Economic & Financial History)
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- 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.
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- Gary S. Shea, 2011. "(Re)financing the Slave Trade with the Royal African Company in the Boom Markets of 1720," CDMA Working Paper Series 201114, Centre for Dynamic Macroeconomic Analysis.
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