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

Campbell, Gareth and Turner, John (2010): ‘The Greatest Bubble in History’: Stock Prices during the British Railway Mania.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: bubbles, financial crises, Railway Mania
• Subjects: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; N - Economic History > N2 - Financial Markets and Institutions > N23 - Europe: Pre-1913; G - Financial Economics > G0 - General > G01 - Financial Crises

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