Munich Personal RePEc Archive

Cross-Section of a ‘Bubble’: Dividends during the British Railway Mania

Campbell, Gareth (2010): Cross-Section of a ‘Bubble’: Dividends during the British Railway Mania.

WarningThere is a more recent version of this item available.
[img]
Preview
PDF
MPRA_paper_23580.pdf

Download (912Kb) | Preview

Abstract

Although historical asset price ‘bubbles’ are often attributed to irrationality, the empirical analysis of such episodes has been limited. This paper examines a 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 results suggest that investors successfully incorporated forecasts of short-term dividend changes into their valuations, but were unable to predict longer-term changes. When short-term growth is controlled for, it appears that the railways were priced consistently with the non-railways for almost the entire episode. These findings may imply that investors had imperfect foresight, but that they acted consistently.

Available Versions of this Item

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.