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

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  • Campbell, Gareth

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.

Suggested Citation

  • Campbell, Gareth, 2010. "Cross-Section of a ‘Bubble’: Stock Prices and Dividends during the British Railway Mania," MPRA Paper 21821, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:21821
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    References listed on IDEAS

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    Cited by:

    1. Campbell, Gareth, 2010. "Leveraging the British Railway Mania: Derivatives for the Individual Investor," MPRA Paper 21822, University Library of Munich, Germany.

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    More about this item

    Keywords

    bubbles; financial crises; Railway Mania;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • G01 - Financial Economics - - General - - - Financial Crises

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