Cross-Section of a ‘Bubble’: Stock Prices and Dividends during the British Railway Mania
Historical ‘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.
|Date of creation:||31 Mar 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- Diba, Behzad T & Grossman, Herschel I, 1988. "Explosive Rational Bubbles in Stock Prices?," American Economic Review, American Economic Association, vol. 78(3), pages 520-30, June.
- Luboš Pástor & Pietro Veronesi, 2009.
"Technological Revolutions and Stock Prices,"
American Economic Review,
American Economic Association, vol. 99(4), pages 1451-83, September.
- repec:fip:fedgsq:y:2010:x:4 is not listed on IDEAS
- Joakim Westerlund, 2007.
"Testing for Error Correction in Panel Data,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 69(6), pages 709-748, December.
- Westerlund, Joakim, 2005. "Testing for Error Correction in Panel Data," Working Papers 2005:11, Lund University, Department of Economics.
- Westerlund Joakim, 2006. "Testing for Error Correction in Panel Data," Research Memorandum 056, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
- Markus K. Brunnermeier & Christian Julliard, 2006.
"Money illusion and housing frenzies,"
LSE Research Online Documents on Economics
4806, London School of Economics and Political Science, LSE Library.
- Brunnermeier, Markus K & Julliard, Christian, 2007. "Money Illusion and Housing Frenzies," CEPR Discussion Papers 6183, C.E.P.R. Discussion Papers.
- Markus K Brunnermeier & Christian Julliard, 2006. "Money Illusion and Housing Frenzies," FMG Discussion Papers dp579, Financial Markets Group.
- Markus K. Brunnermeier & Christian Julliard, 2006. "Money Illusion and Housing Frenzies," NBER Working Papers 12810, National Bureau of Economic Research, Inc.
- Froot, Kenneth A & Obstfeld, Maurice, 1991.
"Intrinsic Bubbles: The Case of Stock Prices,"
American Economic Review,
American Economic Association, vol. 81(5), pages 1189-214, December.
- Refet S. Gürkaynak, 2008.
"Econometric Tests Of Asset Price Bubbles: Taking Stock ,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 22(1), pages 166-186, 02.
- Refet Gurkaynak, 2005. "Econometric Tests of Asset Price Bubbles: Taking Stock," Finance 0504008, EconWPA.
- Refet S. Gürkaynak, 2005. "Econometric tests of asset price bubbles: taking stock," Finance and Economics Discussion Series 2005-04, Board of Governors of the Federal Reserve System (U.S.).
- Peter M. DeMarzo & Ron Kaniel & Ilan Kremer, 2008. "Relative Wealth Concerns and Financial Bubbles," Review of Financial Studies, Society for Financial Studies, vol. 21(1), pages 19-50, January.
- Flood, Robert P & Hodrick, Robert J, 1990. "On Testing for Speculative Bubbles," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 85-101, Spring.
- Robert J. Shiller, 1980.
"Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?,"
NBER Working Papers
0456, National Bureau of Economic Research, Inc.
- Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-36, June.
- Olivier Jeanne & Michael D. Bordo, 2002.
"Monetary Policy and Asset Prices: Does "Benign Neglect" Make Sense?,"
IMF Working Papers
02/225, International Monetary Fund.
- Bordo, Michael D & Jeanne, Olivier, 2002. "Monetary Policy and Asset Prices: Does 'Benign Neglect' Make Sense?," International Finance, Wiley Blackwell, vol. 5(2), pages 139-64, Summer.
- Kenneth D. West, 1987. "A Specification Test for Speculative Bubbles," The Quarterly Journal of Economics, Oxford University Press, vol. 102(3), pages 553-580.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:21821. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.