From the American Economic Association:
Riding the South Sea Bubble
Peter Temin
Hans-Joachim Voth
American Economic Review
vol. 94,
no. 5, December 2004
(pp. 1654-1668)
AbstractThis 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.
The version at the AER is still gated.
If interested here is the working paper version hosted at MIT.
Last seen Saturday July 1, 2023 in:
*****
So, we are faced with the decision whether-or-not to play a
dangerous little game, riding the bubble knowing full well it is a
bubble, or retiring to the sidelines....
For now one of
our favorite economists with one of our favorite storiesNVDA had closed the previous day (Friday) at $423.02.
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