South Sea Company Subscription Shares and Warrant Values in 1720

Gary S. Shea ()
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Gary S. Shea: University of St. Andrews

No 411, CRIEFF Discussion Papers from Centre for Research into Industry, Enterprise, Finance and the Firm

Abstract: The values of the famous Subscription Shares issued by the South Sea Company in 1720 have to be split into two components before they can be understood. One component was a fractional claim upon one original share in the firm. The other component, however, was a bundle of share warrants. The information contained in share warrant values is potentially helpful in understanding the South Sea Bubble. Warrant values might also be especially sensitive to "events" and "news" and could provide new ways of marking the turning points in the South Sea Bubble and testing for efficiency of markets. The level and volatility of subscription share prices are both consistent with the hypothesis that the subscription shares were essentially share warrants.

Keywords: South Sea Bubble; Royal African Company; arbitrage; market efficiency; call options (search for similar items in EconPapers)
JEL-codes: G13 N23 (search for similar items in EconPapers)
Date: 2004-02
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-his
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Citations: View citations in EconPapers (1)

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