Financial Markets Can Go Mad: Evidence of Irrational Behaviour During the South Sea Bubble

@article{Dale2005FinancialMC,
  title={Financial Markets Can Go Mad: Evidence of Irrational Behaviour During the South Sea Bubble},
  author={Richard C. Dale and Johnnie E. V. Johnson and Leilei Tang},
  journal={Economic History},
  year={2005}
}
This paper explores investor behaviour during the South Sea Bubble - the first major speculative boom and bust on the stock markets. Previous literature debates whether investors during this episode acted rationally. Newly acquired data involving parallel markets for the South Sea Company's stock and subscription receipts are analysed, and widening valuation gaps are observed between these substitutable financial instruments. Rational explanations do not prove adequate, and the anomalies are… Expand
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