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

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

Abstract

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.

• 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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