Paper #861

Título:

Riding the South Sea bubble

Autores:

Peter Temin y Joachim Voth

Data:

Diciembre 2004

Resumen:

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.

Palabras clave:

Efficient Market Hypothesis, Bubbles, Crashes, Synchronization Risk, Investor Sentiment, South Sea Bubble, Market Timing, Limits to Arbitrage

Códigos JEL:

G14, E44, N23

Área de investigación:

História Económica y de la Empresa

Publicado en:

American Economic Review, American Economic Association, vol. 94(5), pp. 1654-1668, December 2004

Descargar el paper en formato PDF