Exuberance in historical stock prices during the Mississippi and South Seas bubble episodes

Abstract

The Mississippi Bubble and the South Sea Bubble are the two most famous and earliest episodes in the history of speculation, which can be dated back to the eighteenth century. Unlike most studies focus on some recent financial bubble footprints, we pay special attention to the most remarkable events in 1720. We empirically test for evidence of exuberance in historical stock prices of the Mississippi Company and the South Sea Company during the well-documented Mississippi Bubble and South Sea Bubble episodes, respectively. The right-tailed unit root test of Phillips, Shi and Yu (2015, PSY) is utilised in this paper. In addition, contagion in these historical markets is also considered.