! Yale ICF Working Paper No. 09-04
New Evidence on the First Financial Bubble
Rik G. P. Frehen Tilburg University
William N. Goetzmann School of Management, Yale University
K. Geert Rouwenhorst School of Management, Yale University
Electronic copy available at: http://ssrn.com/abstract=1371007 New!Evidence!on!the!First!Financial!Bubble! !
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! Electronic copy available at: http://ssrn.com/abstract=1371007
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Return!!Indices!of!Major!London!Stocks,!1720 100 10 1 12/31 1/30 2/29 3/30 4/29 5/29 6/28 7/28 8/27 9/26 10/26 11/25 12/25 0 Bank!of!England Royal!African!Company Old!East!India!Company South!Sea!Company Million!Bank York!Building!Society Royal!Exchange!Assurance London!Assurance ! +&D7,"!G! ! @!C�/!C"047,"!3C!","94!&#!+&D7,"!G!&9!4-"!4&1&#D!F&CC","#A"9!&#!4-"!;7;;/"9)!!B-"! 483! 10,&#"! a,0#A"! A31E0#&"9! 0#F! 4-"! `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utch!East!and!West!Indies!Companies! Gregorian!Calendar!Date 8.000 Index ! Price ! Log 0.800 WIC OIC ! +&D7,"!=! +&D7,"!=!9-389!4-"!,&9"!0#F!C0//!3C!&#:"941"#4!&#!4-"!U74A-!J094!R#F&"9!O31E0#L!0#F! 4-"!."94!R#F&"9!O31E0#L!3:",!4-"!E",&3F!3C!23:"1;",$!GHG?!4-,37D-!U"A"1;",$! GH=>)! ! B-"! F040! 0,"! ,"E3,4"F! 4-,""! 4&1"9! E",! 8""'$! 93! 7#/&'"! 4-"! F0&/L! I3#F3#! 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Index 20"11"1719 20"12"1719 19"1"1720 18"2"1720 19"3"1720 18"4"1720 18"5"1720 17"6"1720 17"7"1720 16"8"1720 15"9"1720 15"10"1720 14"11"1720 14"12"1720 1 Gregorian!Calendar!Date WIC OIC ! Figure!2! =! ! Capital!Appreciation!in!Share!Prices,!1720 Prices!indexed!to!1!at!start!of!series 100 1720 ! 1, ! 10 January ! or ! Appreciation ! obsevation ! first ! Capital ! to ! Log 1 indexed ! 1/1 3/1 1/31 3/31 4/30 5/30 6/29 7/29 8/28 9/27 Price 10/27 11/26 12/26 ! with 0.1 Gregorian!Calendar!Dates!in!1720 Rotterdam Royal!Exchange!Assurance London!Assurance South!Sea WIC ! Figure!3! ^! ! Dutch!Prices,!Including!New!Issues!and!Agio,!!!1720 WIC 10000 WIC!1st WIC!2nd! OIC Agio Rotterdam!1st Rotterdam!2nd Delft!1st 1000 Middelburg!Ass. 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