Campbell, Gareth and Turner, John (2010): ‘The Greatest Bubble in History’: Stock Prices during the British Railway Mania.
Download (935Kb) | Preview
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|
|Original Title:||‘The Greatest Bubble in History’: Stock Prices during the British Railway Mania|
|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
|Depositing User:||Gareth Campbell|
|Date Deposited:||07. Apr 2010 01:50|
|Last Modified:||12. Feb 2013 13:09|
Acheson, Graeme G., and John D. Turner. ‘The Secondary Market for Bank Shares in Nineteenth-Century Britain.’ Financial History Review 15, no.2 (2008): 123-52.
Acheson, Graeme G., Charles R. Hickson, John D. Turner and Qing Ye. ‘Rule Britannia!: British Stock Market Returns, 1825-1870.’ Journal of Economic History 69, no.4 (2009): 1106-36.
Anon. The Railway Investment Guide. How to Make Money in Railway Shares: A Series of Hints and Advice to Parties Speculating. London: G. Mann, 1845.
Anon. “Internet Economics: A Thinkers’ Guide.” The Economist 355, Apr. 1st (2000): 64-7.
Anon. ‘A Hard Landing?’ The Economist 357, Dec. 9th (2000): 21-2.
Anon. ‘The Beauty of Bubbles; Booms and Busts.’ The Economist 389, Dec. 20th (2008): 115.
Arnold, A.J. (Tony) and McCartney, Sean. "‘It May Be Earlier Than You Think’: Evidence, Myths and Informed Debate in Accounting History", Critical Perspectives on Accounting, vol. 14, no. 3 (2003): 227-253.
Barnes, Donald G. A History of the Corn Laws from 1660 to 1846. London: G. Routledge and Sons, 1930.
Broadbridge, S. A. ‘The Sources of Railway Share Capital.’ In Railways in the Victorian Economy: Studies in Finance and Economic Growth, edited by M. C. Reed, 184-211. New York: Augustus M. Kelley, 1968.
Bryer, Rob A. “Accounting for the ‘Railway Mania’ of 1845–a Great Railway Swindle?”, Accounting, Organisations and Society, vol. 16, no. 5/6 (1991): 439-486.
Campbell, Gareth. “Cross-Section of a ’Bubble’: Stock Prices and Dividends during the Railway Mania”, SSRN Working Paper (2010).
Carlos, Ann M., Nathalie Moyen, and Jonathan Hill. ‘Royal African Company Share Prices during the South Sea Bubble.’ Explorations in Economic History 39, no.1 (2002): 61-87.
Clapham, John H. The Bank of England: A History, Cambridge University Press 1944.
Dale, R., Johnson, J.E.V. and Tang, L. ‘Financial Markets can Go Mad: Evidence of Irrational Behaviour during the South Sea Bubble’, Economic History Review, vol. 58, no. 2 (2005): 233-271.
Donaldson, R. Glen. and Kamstra, Mark. ‘A New Dividend Forecasting Procedure that Rejects Bubbles in Asset Prices: The Case Of 1929's Stock Crash’, Review of Financial Studies, 9 (1996): 333-383.
Eatwell, John. ‘Useful Bubbles.’ Contributions to Political Economy 23 (2004): 35-47.
Evans, David M. The Commercial Crisis, 1847-1848, David and Charles, Devon, 1849.
Francis, John, A History of the English Railway: Its Social Relations and Revelations. 1820-1845, Longman, Brown, Green, and Longmans, 1851.
Garber, Peter M. ‘Tulipmania.’ Journal of Political Economy 97, no.3 (1989): 535-60.
Garber, Peter M. Famous First Bubbles, the Fundamentals of Early Manias, MIT Press, 2001.
Gayer, Arthur D., W. W. Rostow and Anna Jacobson Schwartz. The Growth and Fluctuation of the British Economy. Oxford: Clarendon Press, 1953.
Gourvish, Terry R. ‘Railways 1830-70: The Formative Years.’ In Transport in Victorian Britain, edited by Michael J. Freeman and Derek H. Aldcroft, 57-91. Manchester: Manchester University Press, 1988.
Hyndman, H. M. Commercial Crises of the Nineteenth Century. New York: Augustus M. Kelley [first pub. 1892].
Jackman, William T. The Development of Transportation in Modern England, Cass, 1966.
Kenwood, A.G. ‘Railway Investment in Britain, 1825-1875.’ Economica 32, no. 127 (1965): 313-22.
Kindleberger, Charles P. A Financial History of Western Europe. London: George Allen and Unwin, 1984.
Kostal, Rande W. Law and English Railway Capitalism, Oxford University Press, 1994.
Lewin, Henry G. The Railway Mania and its Aftermath. Newton Abbot: David & Charles, 1968 [first pub. 1936].
McCartney, Sean, and A. J. (Tony) Arnold. ‘The Railway Mania of 1845-1847: Market Irrationality or Collusive Swindle Based on Accounting Distortions?’ Accounting, Auditing and Accountability Journal 16, no.5 (2003): 821-52.
Miller, Robert C. B. Railway.com: Parallels Between the Early British Railways and the ICT Revolution. London: Institute of Economic Affairs, 2003.
Mitchell, Brian R. ‘The Coming of the Railway and United Kingdom Economic Growth.’ Journal of Economic History 24, no.3 (1964): 315-66.
Mitchell, Brian R., British Historical Statistics, Cambridge University Press, 1988.
Nairn, Alasdair. Engines that Move Markets: Technology Investing from Railroads to the Internet and Beyond, Wiley, 2002.
Neal, Larry. The Rise of Financial Capitalism: International Capital Markets in the Age of Reason. Cambridge: Cambridge University Press, 1993.
Nicholas, Tom. ‘Does Innovation Cause Stock Market Runups? Evidence from the Great Crash.’ American Economic Review 98, no.4 (2009): 1370-96.
Odlyzko, Andrew. Collective Hallucinations and Inefficient Markets: The British Railway Mania of the 1840s, University of Minnesota, 2010. Pástor, Luboš and Pietro Veronesi. ‘Technological Revolutions and Stock Prices.’ American Economic Review 99, no.4 (2009): 1451-83.
Rappoport, Peter and White, Eugene N. ‘Was There a Bubble in the 1929 Stock Market?’, Journal of Economic History, 53 (1993): 549-74.
Reed, Malcolm C. ‘Railways and the Growth of the Capital Market.’ In Railways in the Victorian Economy: Studies in Finance and Economic Growth, edited by M. C. Reed, 162-83. New York: Augustus M. Kelley, 1968.
Reed, Malcolm C. Investment in Railways in Britain 1820-1844: A Study in the Development of the Capital Market. Oxford: Oxford University Press, 1975.
Reinhart, Carmen M., and Kenneth S. Rogoff. This Time Is Different: Eight Centuries of Financial Folly. Princeton: Princeton University Press, 2009.
Shea, Gary S. ‘Understanding Financial Derivatives During the South Sea Bubble: The Case of the South Sea Subscription Shares’, Oxford Economic Papers, vol. 59, no. Supplement 1 (2007): i73-i104.
Shea, Gary S. ‘Financial Market Analysis Can Go Mad (in the Search for Irrational Behaviour During the South Sea Bubble)’, The Economic History Review, vol. 60, no. 4 (2007): 742-765.
Simmons, Jack. The Railway in England and Wales, 1830-1914, vol.1, Leicester: Leicester University Press, 1978.
Simmons, Jack. The Victorian Railway. London: Thames and Hudson, 1991.
Temin, Peter and Voth, Hans-Joachim. 'Riding the South Sea Bubble', American Economic Review, vol. 94(5) (2004): 1654-1668.
Thompson, Earl A. ‘The Tulipmania: Fact or Artifact?’ Public Choice 130, nos. 1-2 (2007): 99-114.
Tuck, Henry. The Railway Shareholder's Manual; Or Practical Guide to All the Railways in the World, Sixth Edition, Effingham Wilson, 1845.
Tuck, Henry. The Railway Shareholder's Manual; Or Practical Guide to All the Railways in the World, Eighth Edition, Effingham Wilson, 1848.
Velde, Francois R. “John Law’s System”, American Economic Review, vol. 97, no. 2 (2007): 276-279.
Voth, Hans-Joachim. “With a Bang, not a Whimper: Pricking Germany's ‘Stock Market Bubble’ in 1927 and the Slide into Depression”, The Journal of Economic History, vol. 63, no. 01 (2003): 65-99.
White, Eugene N. ‘The Stock Market Boom and Crash of 1929 Revisited’, The Journal of Economic Perspectives, vol. 4, no. 2 (1990):67-83.