Riding the South See Bubble

Peter Temin and Hans-Joachim Voth

No 213, Working Papers from Barcelona School of Economics

Abstract: 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.

Keywords: Bubbles; crashes; synchronization risk; investor sentiment; South Sea Bubble; market timing; efficient market hypothesis; limits to arbitrage (search for similar items in EconPapers)
JEL-codes: E44 G14 N23 (search for similar items in EconPapers)
Date: 2015-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Riding the South Sea Bubble (2015)
Journal Article: Riding the South Sea Bubble (2004)
Working Paper: Riding the South Sea Bubble (2004)
Working Paper: Riding the South Sea bubble (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:213

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