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‘The Greatest Bubble in History’: Stock Prices during the British Railway Mania

  • Campbell, Gareth
  • Turner, John

Although the British Railway Mania has been described as one of the greatest bubbles in history, it has been largely neglected by academics. This paper attempts to redress this neglect by creating a daily stock price index for the 1843-50 period and by assessing the contribution of the many newly-created railways to the bubble-like pattern in stock prices. The paper then examines whether this bubble-like pattern was due to an increase in the stochastic discount factor arising from an increase in the probability of large-scale adoption of railway technology. We find little evidence to support this hypothesis.

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File URL: http://mpra.ub.uni-muenchen.de/21820/1/MPRA_paper_21820.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21820.

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Date of creation: 31 Mar 2010
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Handle: RePEc:pra:mprapa:21820
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  1. Campbell, Gareth, 2013. "Deriving the railway mania," Financial History Review, Cambridge University Press, vol. 20(01), pages 1-27, April.
  2. Pástor, Luboš & Veronesi, Pietro, 2005. "Technological Revolutions and Stock Prices," CEPR Discussion Papers 5428, C.E.P.R. Discussion Papers.
  3. 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.
  4. White, Eugene N, 1990. "The Stock Market Boom and Crash of 1929 Revisited," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 67-83, Spring.
  5. Acheson, Graeme G. & Turner, John D., 2008. "The secondary market for bank shares in nineteenth-century Britain," Financial History Review, Cambridge University Press, vol. 15(02), pages 123-151, October.
  6. 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.
  7. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
  8. Rappoport, Peter & White, Eugene N., 1993. "Was There a Bubble in the 1929 Stock Market?," The Journal of Economic History, Cambridge University Press, vol. 53(03), pages 549-574, September.
  9. Peter M. Garber, 2001. "Famous First Bubbles: The Fundamentals of Early Manias," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262571536, June.
  10. Gary S. Shea, 2005. "Understanding financial derivatives during the South Sea Bubble: the case of the South Sea subscription shares," CDMA Working Paper Series 200512, Centre for Dynamic Macroeconomic Analysis.
  11. Donaldson, R Glen & Kamstra, Mark, 1996. "A New Dividend Forecasting Procedure That Rejects Bubbles in Asset Prices: The Case of 1929's Stock Crash," Review of Financial Studies, Society for Financial Studies, vol. 9(2), pages 333-83.
  12. François R. Velde, 2007. "John Law's System," American Economic Review, American Economic Association, vol. 97(2), pages 276-279, May.
  13. repec:cup:cbooks:9780521457385 is not listed on IDEAS
  14. Mitchell, B. R., 1964. "The Coming of the Railway and United Kingdom Economic Growth," The Journal of Economic History, Cambridge University Press, vol. 24(03), pages 315-336, September.
  15. Acheson, Graeme G. & Hickson, Charles R. & Turner, John D. & Ye, Qing, 2009. "Rule Britannia! British Stock Market Returns, 1825-1870," The Journal of Economic History, Cambridge University Press, vol. 69(04), pages 1107-1137, December.
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