Riding the South Sea bubble
Peter Temin and
Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
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: Efficient Market Hypothesis; Bubbles; Crashes; Synchronization Risk; Investor Sentiment; South Sea Bubble; Market Timing; Limits to Arbitrage (search for similar items in EconPapers)
JEL-codes: G14 E44 N23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin, nep-fmk, nep-his and nep-mac
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Journal Article: Riding the South Sea Bubble (2004)
Working Paper: Riding the South See Bubble (2004)
Working Paper: Riding the South Sea Bubble (2004)
Working Paper: Riding the South Sea Bubble (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:861
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