To access the full text documents, please follow this link: http://hdl.handle.net/10230/508

Riding the South Sea bubble
Temin, Peter; Voth, Joachim
Universitat Pompeu Fabra. Departament d'Economia i Empresa
This paper presents a case study of a well-informed investor in the South Sea bubble. We argue that Hoare's Bank, a fledgling West End London banker, knew that a bubble was in progress and nonetheless invested in the stock; it was profitable to "ride the bubble." Using a unique dataset on daily trades, we show that this sophisticated investor was not constrained by institutional factors such as restrictions on short sales or agency problems. Instead, this study demonstrates that predictable investor sentiment can prevent attacks on a bubble; rational investors may only attack when some coordinating event promotes joint action.
2005-09-15
Economic and Business History
efficient market hypothesis
bubbles
crashes
synchronization risk
investor sentiment
south sea bubble
market timing
limits to arbitrage
L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
http://creativecommons.org/licenses/by-nc-nd/3.0/es/
Working Paper
         

Show full item record

 

Coordination

 

Supporters