South Sea Company Subscription Shares and Warrant Values in 1720
The values of the famous Subscription Shares issued by the South Sea Company in 1720 have to be split into two components before they can be understood. One component was a fractional claim upon one original share in the firm. The other component, however, was a bundle of share warrants. The information contained in share warrant values is potentially helpful in understanding the South Sea Bubble. Warrant values might also be especially sensitive to "events" and "news" and could provide new ways of marking the turning points in the South Sea Bubble and testing for efficiency of markets. The level and volatility of subscription share prices are both consistent with the hypothesis that the subscription shares were essentially share warrants.
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