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

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  • Campbell, Gareth
  • Turner, John

Abstract

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.

Suggested Citation

  • Campbell, Gareth & Turner, John, 2010. "‘The Greatest Bubble in History’: Stock Prices during the British Railway Mania," MPRA Paper 21820, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:21820
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    References listed on IDEAS

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    Cited by:

    1. Campbell, Gareth, 2010. "Leveraging the British Railway Mania: Derivatives for the Individual Investor," MPRA Paper 21822, University Library of Munich, Germany.
    2. Queirós, Francisco, 2024. "Asset bubbles and product market competition," Theoretical Economics, Econometric Society, vol. 19(1), January.
    3. Yang Hu & Les Oxley, 2017. "Exuberance in British Share Prices during the Railway Mania of the 1840s: Evidence from the Phillips, Shi and Yu Test," Working Papers in Economics 17/09, University of Waikato.
    4. Hugh Goldsmith, 2014. "The Long-Run Evolution of Infrastructure Services," CESifo Working Paper Series 5073, CESifo.

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    More about this item

    Keywords

    bubbles; financial crises; Railway Mania;
    All these keywords.

    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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