Riding the South Sea Bubble

Peter Temin and Hans-Joachim Voth

American Economic Review, 2004, vol. 94, issue 5, 1654-1668

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 bank, 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 such institutional factors 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 attack only when some coordinating event promotes joint action.

Date: 2004
Note: DOI: 10.1257/0002828043052268
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Citations: View citations in EconPapers (82)

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Related works:
Working Paper: Riding the South See Bubble (2015)
Working Paper: Riding the South Sea Bubble (2015)
Working Paper: Riding the South Sea Bubble (2004)
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